The recent rally in the S&P 500 has made history with sustained gains and minimal days of losses, but analysts are now warning of possible downturns ahead.
In this regard, data shared by research platform The Kobeissi Letter in an X post on July 19 revealed that the S&P 500 has experienced 352 trading days without a single day where it fell by 2% or more.
According to the data, this streak marks the longest stretch of low volatility in the past 14 years and the 10th longest in the stock market’s history.
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The data sourced from Bloomberg Finance LP and Deutsche Bank indicates that the recent streak shows a remarkable period of stability that stands out significantly compared to historical data.
However, the Kobeissi Letter’s analysis points to a possible significant shift in market conditions. This suggests that the conditions fostering such an extended period of low volatility may be changing rapidly.
Notably, based on historical data, periods of low volatility, like the one just experienced, are often followed by periods of high volatility.
“We just witnessed history: It has now been 352 trading days without a 2% down day in the S&P 500, the longest stretch in 14 years. <…> Periods of low volatility are almost always followed by periods of high volatility. The current period of low volatility is coming to an end,” the platform noted.
Implication of S&P 500 performance
It’s worth noting that the index has recently rallied, led by technology stocks, especially those in the semiconductor space. Notably, these stocks, including giants such as Nvidia (NASDAQ: NVDA), have seen increased bearish sentiments in the short term, mainly due to geopolitical uncertainties.
It will be interesting to monitor how the volatility picks up, considering that several analysts have projected that the index’s recent rally could lead to a crash, potentially dragging down the entire stock market. Indeed, the rally was mainly concentrated in a few select equities.
At the same time, as reported by Finbold, large tech stocks have seen an outflow of capital, with investors preferring small-cap equities.
Meanwhile, the index is showing bearishness in the short term. As of press time, it had 5,517.50 points, reflecting a daily loss of almost 0.5%.
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