Wall Street Week Ahead: Stock market's record-setting rebound may have further to go

economictimes.indiatimes.com:

rebound that has taken the U.S. stock market to record highs this week may have further to run, if history is any guide.

Fresh signs of a cooling economy calmed inflation worries in May, helping all three major U.S. stock indexes rise to records this week. The benchmark S&P 500, which fell over 4% in April, is now up 11% year-to-date.

Market strategists who track historical trends say stocks tend to build momentum when recovering from similar-sized pullbacks, often continuing to rally even after making up lost ground.

Should the current bounce conform to that pattern, more gains could be in store. Past rebounds in the S&P 500 from 5% pullbacks have been followed by a median gain of 17.4%, said Keith Lerner, co-chief investment officer at Truist Advisory Services. As of Friday, the index was up nearly 7% from its April lows.

«Once you find the low, the market typically has further to go than what we've seen so far,» said Lerner, who studied data going back to 2009.

Broader historical comparisons also suggest more upside ahead for the current bull market. Lerner's study showed a 108% median climb for bull markets since the 1950s, compared to the nearly 50% the S&P 500 has gained since October 2022.

At the same time, the median length for a bull market in that period has been just over 4.5 years compared to slightly more than 1.5 years since the start of the current one, Lerner's data showed.

Investors have pointed to renewed optimism that the economy is heading for a so-called soft landing and projections for