iFund-Statistical data implies S&P 500 is going to be bullish this year

2019-03-21 07:05
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Since the Second World War, the S&P 500 has never recorded a negative a one-year return after the midterm elections. The average return and median return for the past 18 times were 14.5% and 13.9% respectively. From a fundamental point of view, the trade war is going to be ended, and global market is slowly recovering. Investors should be not bearish on US market.

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The S&P 500 Index has rebounded more than 20% from the low of December last year. Will the rally continue? Let’s see what we can learn from the history.

High probability of positive return for the rest of 2019

The S&P 500 index gained 7.87% and 2.97% in January and February respectively this year, the 28th time since 1950. Looking back at the past 27 records, when S&P 500 index rose in both January and February, the average return and median return for the next 10 months were 12.1% and 11.2% respectively. Negative returns were only found in 1987 and 2011 (see Figure 1). The results are impressive when comparing the average return starting from March to December since 1950, which is just 7.6% only.

Figure 1: Performance of the past 27 times after S&P 500 Index gained positive returns in both January and February.

Source: LPL Research, Bloomberg, iFund/Noble Apex Advisors Ltd.

New high of S&P 500 of this year is coming

On February 19, 2019, the S&P 500 Index components’ price, which were above the 50-day moving average, reached 92.5%, the 14th time since 1990. In the past 13 times, after more than 90% of the S&P 500 Index constituents’ price were above the 50-day moving average, and the average returns for the next month, three months and six months were 2.6%, 4.7% and 8.1% respectively. The median returns were 3.0%, 4.6% and 9.1% respectively (see Figure 2).

Figure 2: The return after more than 90% of the S&P 500 Index constituents’ price above the 50-day moving average

Source: LPL Research, Bloomberg, iFund/Noble Apex Advisors Ltd.

One-year return of S&P500 after the mid-term election is particularly good

In fact, since the Second World War, the S&P 500 has never recorded a negative a one-year return after the midterm elections. The average return and median return for the past 18 times were 14.5% and 13.9% respectively. From a fundamental point of view, the trade war is going to be ended, and global market is slowly recovering. Investors should be not bearish on US market.

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