New all-time highs in September have historically been bullish
Although S&P 500 did not close today at a new all-time high it did earlier this week for a total of five so far this September. Looking back at past years when S&P 500 closed at a new all-time high one or more times in September, we see subsequent performance improve when compared to "All Years". The biggest improvement was in full-month September performance, jumping from a 0.68% average loss in "All Years" to a 1.15% gain. Frequency of gains in September also improved significantly from just 44% to 68.2%. November’s results also show a sizable improvement in both average gain and frequency of advance. October and December were modestly softer however, remained bullish.
Performance from October through December has historically been solid but it also improved following new all-time highs in September with only two losses in 22 years. There was also a reduction in the maximum drawdown during the October to December period. The only double-digit decline was in 2018 when the Fed upset the market by pushing interest rates too high.
In the near term, we still cannot completely rule out the possibility of some market weakness and headline induced volatility especially in the week after Triple Witching quarterly options expiration. But we still anticipate any pullback, or retreat to be relatively brief and shallow. Afterwards the current bull market is likely to propel the market to more new all-time highs as yearend approaches. It is for these reasons that we presented a basket of new stock ideas to members recently.
