What to Expect With Stocks at All-Time Highs

The Dow Jones Industrial Average (DJI), S&P 500 Index (SPX), Nasdaq Composite (COMP), and Russell 2000 Index (RUT) simultaneously notched all-time closing peaks for the first time since 1999

Nov 22, 2016 at 2:17 PM
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Stock markets have been soaring since Donald Trump claimed victory in the U.S. presidential race on Nov. 8. Yesterday, in fact, the Dow Jones Industrial Average (DJI), S&P 500 Index (SPX), Nasdaq Composite (COMP), and Russell 2000 Index (RUT) all settled at all-time closing highs -- a first for the foursome since Dec. 31, 1999, and just the 17th time since 1983. Stocks are continuing their record-setting run today, with each benchmark fresh off a record intraday high, and the Dow making its inaugural trek north of 19,000. Nevertheless, according to data compiled by Schaeffer's Senior Quantitative Analyst Rocky White, the Dow and SPX could be in for a short-term breather, if history is any guide, while the COMP and RUT may see some near-term outperformance.

After closing last night at 18,956.69, the DJI took its first step above 19,000 in early trading -- topping out at 19,014.73 -- and was last seen up 0.3% at 19,004.18. Looking ahead, the blue-chip barometer could be poised to pull back from this notable milestone. Specifically, in the 16 other times all four benchmarks simultaneously closed at a record high since 1983, the Dow has averaged a 0.1% one-week loss, compared to an anytime gain of 0.2%. What's more, the DJI is positive only 43.8% of the time one week post-signal, compared to an anytime "percent positive" of 56.9%. This underperformance is seen across all time frames, too, although volatility tends to pick up at the six-month mark, as measured by the standard deviation.

dow returns since 1983

This post-signal underperformance is echoed in the SPX, as well. Although the SPX is trading fractionally higher this afternoon at 2,198.93 -- and earlier tagged an all-time intraday peak of 2,203.56 -- the broad-market barometer has averaged a loss of 0.1% in the week after simultaneously closing at a record peak with its fellow benchmarks, and is positive only 37.5% of the time. Compare this to a one-week anytime return of 0.2%, with the SPX positive 56.7% of the time.

spx returns since 1983

Shifting gears to the COMP -- which is up 0.2% at 5,378.50, and fresh off its own record intraday high of 5,392.26. If past is precedent, the tech-heavy index could chart a separate course from the Dow and SPX, at least in the near term. Specifically, in the 16 other times the COMP has logged an all-time closing high on the same day as its peers, it has gone on to average a one-week gain of 0.2%, in line with the COMP's one-week anytime returns. Looking at the one-month mark, in particular, the COMP has turned in a post-signal outperformance, averaging a gain of 1.6%, versus an anytime return of 1%. What's more, the percent positive for the one-month time frame is notably higher for the post-signal COMP returns versus the anytime returns.

nasdaq returns since 1983

Likewise, the RUT has tended to turn in a post-signal outperformance, at least in the near term. Drilling down on the data, the small-cap barometer has averaged a one-week post-signal return of 0.3%, slightly higher than the anytime gain of 0.2%. At the one-month mark, though, RUT has gained, on average, 1.6% after tagging an all-time closing high with its peers, compared to an anytime return of 0.8%. Plus, the RUT's one-month post-signal percent positive arrives at a 68.8% versus 60.9% in the anytime column. At last check, the Russell 2000 Index was outperforming, up 0.5% at 1,328.13, and earlier hit an all-time intraday best of 1,328.58. Should RUT settle today's session in the green, it would mark its 13th straight daily win -- a feat not accomplished since 1996.

rut returns since 1983

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