The S&P 500 (SNPINDEX:^GSPC) had been unusually calm until this week. Through the close on Tuesday, Oct. 13, the index had gone 53 straight trading days without a daily drop of 1% or more. The last one was on July 29, when it lost around 1.5%. Then on Wednesday, it fell about 1.1% to around 7,719, ending the streak.
That’s a big shift from earlier this year, when the index posted 18 of those 1% down days from January through July 29, by my count. And it’s gained through the quiet stretch, closing at around 7,805 on Tuesday, a little under its record close of about 7,819 on Oct. 6.
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A quiet stretch that ends near a record can make investors nervous. But the index has seen dozens of runs like this one since 1950, and its record after them arguably looks a lot like its record after any other day.
Image source: Getty Images.
Calm streaks aren’t rare
By my count, 55 streaks since 1950, including this one, have hit 50 sessions without a 1% drop, and several went past 100 sessions. The latest of those lasted 112 sessions and ended in January 2018.
But how often they happen changes a lot from year to year. The index has averaged around 25 daily drops of 1% or more a year since 1950. It had 63 in 2022 and just four in 2017. And 2026, of course, has already had both types of stretch.
What happened a year later?
I used the S&P 500’s daily closing prices since 1950, leaving out dividends. A 1% drop meant a close at least 1% under the previous day’s close.
For every streak, I started the clock on the day it hit 50 sessions and checked the index 252 trading sessions later, or around a year. That way, each streak counts once, no matter how long it lasted.
Of the 54 past streaks, the index ended that year up in 40, or 74% of the time. Its average gain was around 8%. In the same period, the S&P 500 was up a year after any trading day about 75% of the time, with an average gain of about 9%.
In other words, the calm streaks did about as well as a random day. Knowing the market had gone 50 sessions without a 1% drop wouldn’t have shifted the odds of a higher index a year out in any useful way.
The 14 misses bunched up, too, with 11 of them falling between 1952 and 1969. Since 1978, 23 of 24 streaks were followed by a higher index a year later. But the whole market has done better since then. Since 1978, the S&P 500 has been up a year after around 80% of all trading days.
