Historic Data Points To Strong Gains For S&P 500 In 2021

Welcome to Finom Group's weekly data Mash-up at February's month-end. With a few days left in the trading month, the S&P 500 has grappled back all it had lost in January and then some. While the benchmark index seems in need of a rest and breadth has weakened over the previous trading days, last Friday's decline held some hidden secrets underneath the hood of the index. With that said, let's review some recent historical data and technicals in order to understand the probable outcomes for the S&P 500 going forward!

  • A 10% or more gain in the final 2 months of the year has equaled a higher S&P 500 the following year every single time since World War II.
  • This just happened in 2020 folks!
  • Additionally, January was higher every single time, until 2021! (Chart from LPL Financial)

  • This study above from Nautilus Research identifies when the S&P 500 has gained 10%+ within 6 Months of the last occurrence since WW2. In other words, when it happens twice within close proximity.
  • The last occurrence was November 2020. 1-month return is actually negative, but December 2020 held a positive return.
  • January, or the 2-month return, had a little of 50% positivity rate and an average return of 1.6%. January 2020 was negative.
  • The 3-month return would be February 2020 and has an average return of 3.47% and a positivity rate of 74%. February 2021 to-date is up more than 5%. 
  • The VIX spiked 62% higher on January 27, the 3rd largest 1-day % increase in history.
  • VIX data goes back to 1990).

  • When VIX Spikes 40% for the first time in at least a month, the SPX Reward to Risk is suboptimal (below 2) for the next few months.
  • February 2020 is materially outperforming the historic data thus far.

  • The first week of February, the S&P 500 was green all 5 days and finished at an all-time high.
  • This was the 20th perfect week like that since 1990.
  • Returns out 6 months seem about average, but a year later stocks are higher 89% of the time and up 15% on average.
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