Key insights
- The S&P 500 has achieved a seven-week winning streak, a relatively rare occurrence. Historical data suggests that such streaks often continue, with positive returns likely in the coming months. The analysis indicates a high probability of further gains, with annualized returns exceeding the historical average for the S&P 500, suggesting a bullish outlook for US equities.
Since the March low, the S&P 500 (^GSPC 0.67%) has been on a nearly unimpeded run. Last week, the index marked its seventh consecutive weekly gain, and it has recorded a return of around 16% over that period.
How rare is a seven-week winning streak for the index? Since 1928, this would be the 40th occurrence. The last time the S&P 500 hit this mark was in December 2023, when it eventually produced nine straight up weeks in total before snapping. It's also the ninth time it's happened in the 2000s.
Naturally, one might assume that the index is due for a pause or a reversal after such stretches. Three of the past four weeks, however, have featured only minor to modest gains for the S&P 500. This would suggest positive, but not necessarily powerful, momentum that has a greater chance of running out of steam.
If we look back at the past century of S&P 500 return data, history suggests that the gains are likely to keep coming.
Let's break down the numbers.
Before we get to how returns have looked historically in the 12 months following a seven-week up streak, consider this. In only about one-third of historical instances has the streak stopped at seven weeks. Another one-third made it to nine weeks or longer. The all-time record is a 13-week streak of gains that happened back in 1957.
Clearly, this current bull rally has the potential to continue, and the historical data confirms it.
The "hit rate," which is the percentage of instances where returns are positive, is quite good historically.
The annualized returns at all periods are greater than the 10% average annual return the S&P 500 has seen over the past century. The three-month time period produced the best annualized rate of return and the best positive return rate. But the 82% success rate and 13.6% median annual return 12 months out from when the streak hits seven weeks are both well above long-term averages.
The conclusion here would be that long steady streaks of gains for the S&P 500 aren't ended with tops. They're indicators of strength and momentum that can continue for months, if not longer.
The outlook for stocks following streaks like these often came with a catalyst. How stock gains followed through depended on whether it was a long-term structural one or more of a short-term shock.
Here are a few examples from the past 30 years:
In other words, each situation is unique and depends on conditions at the time.
Currently, we could pick apart warning signs for the economy, and there are a few of them. The Iran war is dragging on. Inflation could hit 4% to 5% before the end of the year. Oil prices are surging.
But the one factor I can't overlook is corporate earnings.
When S&P 500 earnings are rising as strongly as they are and are expected to continue doing so, it makes it harder to argue that a significant correction is about to happen. In first-quarter 2026, the S&P 500 is on pace to grow earnings by 27.7% year over year. They're expected to grow another 21% in calendar year 2026, and more than 15% in 2027.
Parts of the economy may slow over the next couple of years, but corporate fundamentals sure seem more than able to support higher stock prices from here.
The other thing supporting the bull case is that stocks aren't even particularly expensive right now. The forward price-to-earnings (P/E) ratio for the S&P 500 is 21. That's above the index's long-term average, but more than reasonable given where earnings growth rates are. For as much as investors want to talk about the risk of multiple contraction, I have difficulty seeing that happening in this kind of environment.