S&P 500 ends 53-day streak without 1% drop

The S&P 500 (^GSPC) ended a 53-trading-day streak without a daily decline of 1% or more when the index fell about 1.1% to around 7,719 on Wednesday. The previous drop of that magnitude occurred on July 29, when the index lost around 1.5%.

The index had closed at approximately 7,805 on Tuesday, October 13, just below its record close of about 7,819 set on October 6. This recent calm contrasts with the period from January through July 29, during which the index posted 18 daily drops of at least 1%.

Historical data from the S&P 500's daily closing prices since 1950, excluding dividends, shows that 55 streaks have reached 50 sessions without a 1% drop. Several of these runs extended past 100 sessions, with the most recent lasting 112 sessions and ending in January 2018. The frequency of such drops varies significantly by year; the index averaged around 25 daily drops of 1% or more annually since 1950, but recorded 63 in 2022 and only four in 2017.

For each historical streak that hit the 50-session mark, the index's performance one year later (252 trading sessions) was measured. Of the 54 past streaks, the index ended that year higher in 40 cases, or 74% of the time, with an average gain of around 8%. This is nearly identical to the market's performance after any random trading day, where the index was up a year later about 75% of the time with an average gain of about 9%.

The distribution of underperforming streaks is uneven. Eleven of the 14 streaks followed by a lower index a year later occurred between 1952 and 1969. Since 1978, the index was higher a year after 23 of the last 24 such streaks. However, the broader market has also performed better in that later period, with the S&P 500 up a year after roughly 80% of all trading days since 1978.

Short-term performance following these streaks has been weaker. One month (21 sessions) after a streak reached 50 sessions, the index was higher in only 26 of 54 historical cases, compared to around 62% of all trading days. This suggests that a calm spell does not reliably lead to immediate further gains.

The severity of the drop that ends a streak can vary widely. The streak that hit 50 sessions in early September 2018 ended on October 10 with a 3.3% decline led by tech stocks, and by late December the index had closed almost 20% below its September record. Similarly, the streak reaching 50 sessions in December 2019 ended in late January 2020, followed by a nearly 34% tumble from February 19 to March 23. Despite these sharp declines, the index was up by around 3% a year after the September 2018 streak and by about 17% a year after the December 2019 streak.

Over a full year, corporate earnings and investor willingness to pay for those earnings remain the primary drivers of index value. The end of a quiet stretch does not necessarily signal a change in long-term direction, as historical outcomes mirror those of any other trading day.