- The S&P 500 snapped a crucial winning streak last week.
- While this could indicate weakness, history suggests otherwise.
- In this article, we'll consider two factors that suggest a potential return to an uptrend.
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The S&P 500's impressive 356-day run without a 2% decline abruptly ended last week, fueling concerns about an extended market correction.
This 365-day streak marked the longest period without a 2% drop since before the Great Recession.
While the index has historically rebounded after similar streaks ended, investors are closely watching for signs of sustained weakness. 
What Does the Streak's End Entail for Stocks?
With the streak broken, investors are questioning the future implications for the market. Carson Research analyzed historical data to understand market behavior following the end of similar periods.
The findings are optimistic, showing that strong momentum typically leads to an even stronger uptrend. While concerns about prolonged declines exist, the statistical data suggest bullish prospects for the stock market.
Factors That Could Support This Uptrend
1. Strong GDP Growth:
The U.S. real GDP for the second quarter of 2024 surprised many, registering a robust growth of 2.8%, much higher than expected.
This figure, adjusted for inflation, indicates that the economy is expanding at a healthy pace, consistent with non-recessionary periods, and has been generating steady quarterly growth between 0.35% and 1.2% since mid-2022.
2. Positive Earnings Expectations:
Another catalyst for the bullish market is the persistent rise in future earnings expectations for the S&P 500, which is currently trading at a price/earnings ratio of 20.6x.
While some caution against calling the current environment a bubble, it is noteworthy that earnings season is just beginning, with about 60% of companies yet to report their results.
While short-term volatility is expected, investors should maintain a long-term perspective even as the index's 356-day streak snaps. The recent pullback presents an opportunity to rebalance portfolios and consider adding to positions in quality stocks.
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Disclaimer: This article is written for informational purposes only; it does not constitute a solicitation, offer, advice, counsel or recommendation to invest as such it is not intended to incentivize the purchase of assets in any way. I would like to remind you that any type of asset, is evaluated from multiple perspectives and is highly risky and therefore, any investment decision and the associated risk remains with the investor.