Will the S&P 500 Keep Rising After Hitting a 52-Week High?

Brad here. We just published our Midyear Outlook, and as you saw yesterday, we remain cautious about the market for several reasons. At the same time, over the longer term, the market does tend to go up—and even in the shorter term, there are alternative possibilities to consider.

For most people, that means focusing on the risk, and that’s fine—but it misses half, and possibly more, of the big picture. So, for a look at the potential upside, here’s a great piece from my colleague Tom Logue on why the market may well keep rising, especially over the next year.

While he doesn’t rule out more short-term volatility, he makes a good case that things can reasonably be expected to be much better than the headlines would suggest. Which is an argument, as you know, that I have a lot of sympathy for.

Thanks, Tom!

2022 was a rough year for stocks, but things have been different thus far in 2023. We were, by definition, in a new bull market when, at the end of May, the S&P 500 had climbed more than 20 percent from its low in October 2022. After such a significant rise, some might be wondering if the recovery has run its course or if there’s more room for growth.

Interestingly, the week of June 12, 2023, was a big deal for the S&P 500.

A Long Time Coming: The S&P 500’s 52-Week High

On June 12, the index reached its highest point in over a year, or 52 weeks. That’s a long time for the index to go without reaching a new high. History suggests that these 52-week-high occurrences can signal more positive returns for the stock market in the future.

Here’s some context. Since 1950, there have been only 15 other instances where the S&P 500 has gone at least a year without hitting a new high. In about 60 percent of those cases, stocks continued to climb in the short term, defined as one week to four weeks after the new high. But in other cases, the index also experienced some turbulence in the short term. For instance:

• Following the 52-week high in October 2009 (coming out of the global financial crisis), the S&P 500 dropped nearly 7 percent over the next month.
• Following the 52-week high in July 2003 (coming out of the dot-com bubble burst), the S&P 500 dropped a little more than 5 percent over the next three weeks.

Looking at a slightly longer period of about three months, the index kept rising 80 percent of the time. The average increase during those periods was about 5.9 percent. The worst episode happened after the index hit a 52-week high during the week of June 23, 1975. Over the next 12 weeks, the S&P 500 dropped 14.78 percent before bottoming and continuing the upward trend.

The Most Important Takeaway

When we consider the period of a full year after a new 52-week high, it gets even more promising. In all 15 instances, the index was higher a year later, often significantly. The average increase was about 18.08 percent.

What's even more impressive is that in each of those prior 15 instances, the S&P 500 typically reached another new high 20 times over the next year. In one case, after February 6, 1995, the S&P 500 reached a new high an incredible 36 times over the following year!

The stock market may continue to be a bit bumpy throughout the summer, but from a long-term perspective, the outlook remains promising.