20-05-2025
The S&P 500 could soon return to record highs as sentiment improves
For the moment, it seems stocks can't be stopped. The S & P 500 eked out a small gain on Monday, extending its winning streak to six days after reversing a decline sparked by a Moody's downgrade of the U.S. debt. The advance added to the benchmark's rebound off the lows that followed the April 2 tariff announcement. Since reaching an April 7 intraday low, the index is up more than 23%. Easing tariff rates and improving investor sentiment fueled the gain. What's next, if history is any indication, is an extension of this bounce — which could take the S & P 500 back to all-time highs. Bank of America noted that its Global Equity Risk-Love Indicator has bounced from "deep panic readings" in early April back to neutral. Strategist Ritesh Samadhiya noted the indicator has swung from panic to neutral 32 times in the last 38 years. He added that in only four of those instances did sentiment fall back into panic levels — "while in all other episodes, it rose further to euphoric levels." "Washed-out sentiment, followed by marked improvement in market breadth against a backdrop of monetary easing, has historically been associated with a continuation or formation of a new bull market. While history is not a perfect guide, the weight of the evidence suggests that markets may continue to climb higher," Samadhiya said. .SPX bar 2025-04-07 S & P 500 since April 7 The S & P 500 ended Monday's session just 3% below its record closing high of 6,144.15. To be sure, megacap tech — which has led the market rebound back toward record highs — could lose steam near term. DataTrek Research co-founder Jessica Rabe noted that the iShares MSCI USA Momentum Factor ETF (MTUM) has outperformed the S & P 500 by 10 percentage points this year. Historically, momentum has lagged the broader market index following periods of such strong gains. "When Momentum has beaten the S & P by at least 10 points over any given 100 trading day holding period as it has just done, it has gone on to underperform by an average of 3.8 points over the next 100 days," Rabe wrote. "Further, its win rate (positive forward 100-day returns/total) is just 19 percent."
