The Stock Market Just Did Something for Only the 14th Time in 45 Years -- and It Has a 92% Success Rate of Forecasting the Direction the S&P 500 Will Move Next
News Summary
After a significant market rally, a rare signal flashed in the U.S. stock market: over 90% of stocks on the New York Stock Exchange (NYSE) advanced, with total trading volume also exceeding 91%. This phenomenon, known as a "90/90 day," has only occurred 14 times since 1980, with this being the second instance this year. Historically, in the 12 months following a "90/90 day," the S&P 500 index has risen on 92% of occasions, with an average gain of 23%. While past performance is not indicative of future results and the market faces uncertainties from inflation, changing tariffs, and Federal Reserve interest rate decisions, this signal nonetheless offers a historically bullish indicator for investors.
Background
At the start of 2025, the U.S. stock market performed strongly, with the S&P 500 reaching record highs in February. However, concerns over tariffs and rekindled inflation fears led to a significant 19% market plunge. Since bottoming out in April, the market has seen a stunning rebound, with the S&P 500 once again nearing new record highs. A "90/90 day" is a technical indicator measuring market breadth, signifying a broad-based market rally where a vast majority of stocks advance, accompanied by high trading volume. It is used by some investors as a reference for short-term market trends to gauge the strength and sustainability of a rally.
In-Depth AI Insights
Does the current "90/90 day" signal suggest the market has effectively digested the Trump administration's tariff policies and inflation pressures, shifting towards more optimistic growth expectations? - On the surface, the expanding market breadth and strong historical data imply potential positive momentum. However, this signal might primarily reflect technical buying and short-term rally chasing, rather than a thorough resolution of deep economic structural issues. - Investors might be weighing the short-term boost to certain domestic industries from the Trump administration's protectionist trade policies against the potential long-term negative impacts on global supply chains and corporate earnings. - The market may also be anticipating that the Federal Reserve's interest rate policy, despite inflation pressures, will stabilize or eventually pivot towards easing, thereby supporting risk assets. Given the persistent battle with inflation and the rapidly changing tariff landscape under President Trump in 2025, could the reliability of such historical technical signals be diminished? - Historical data is based on past market cycles, whereas the current global economic inflation drivers (e.g., supply chain restructuring, changes in labor market structure) and the Trump administration's trade policies are quite unique and unpredictable. - The market has experienced significant "whiplash-inducing" volatility over the past few years, indicating that investor sentiment and capital flows are more susceptible to macro events, which could reduce the predictive power of purely technical indicators. - Investors should be wary that while the signal suggests an average 23% gain, this gain might be accompanied by severe volatility rather than a smooth ascent, posing challenges for portfolio management. For long-term investors, how should portfolio strategies be adjusted to balance risk and reward in a highly volatile market driven by technical signals? - Given the expected continuation of market volatility and potential sharp corrections, long-term investors should maintain discipline, for example, by regularly investing through dollar-cost averaging rather than attempting to time the market. - Focus on high-quality companies with strong pricing power, capable of passing on inflationary costs to consumers, and less susceptible to tariff impacts, to weather macro uncertainties. - With strong market breadth, consider a balanced allocation across various sectors, particularly focusing on companies that benefit from structural growth trends (e.g., technological innovation, energy transition) rather than short-term macro fluctuations.