A lot of people are arguing that the market CAN’T GO HIGHER! Let me tell you, it can go higher

A lot of people are arguing that the market CAN’T GO HIGHER!  Let me tell you, it can go higher


Well, this market is nothing if not special.  The S&P 500 has gone 84 trading days without a loss of 1% or more.  As you can see in the table below, that ranks it #17 of all streaks since 1950.  If it can last through February 27th, it will be the longest streak since 1995.  If it can last through March 23rd, it will be the longest streak since 1966.  The all-time record (since 1950) would take us all the way to June.

Here’s another way to think about this — look at the VIX.  It closed today at 10.85.  Sleepy, sleepy… no risk to be found.  When you don’t have any significant falls in the market, the VIX tends to sag.  Aside from the election, which is an exception to the rule, the last two peaks of the VIX over the last six months were after 1%+ drops in the S&P 500.

Qualivian Investment Partners 2Q22 Investor Letter

TD1655 Newsletter Placement 1Dear Friends of the Fund, Please find enclosed our Q2 2022 investor letter for your review.  Qualivian reached its four-year mark in December of 2021. We are actively weighing investment proposals. Please refer to our Q2 2022 investor letter for our performance and commentary on the second quarter of 2022. A fact sheet is 

The same would apply to credit spreads, which are also tight.  No one expects a change in liquidity, a credit event, a national security incident, etc.  But as I commented on Friday:

This is an awkward time when you have a lot of people arguing that the market CAN’T GO HIGHER!  Let me tell you, it can go higher.

Will it go higher?  Who knows?

Should it go higher?  That’s the better question, and may help with the prior question.  If you’re thinking strictly about absolute valuation, it shouldn’t go higher — we’re in the mid-80s on a percentile basis.  On a relative valuation basis, where are you going to go?  On a momentum basis, it should go higher.  It’s not a rip-roarer in terms of angle of ascent, which bodes well for it.  The rallies that fail tend to be more violent, and this one is kinda timid.

We sometimes ask in investing “who has the most to lose?”  As in my tweet above, that very well could be asset allocators with low stock allocations that conclude that they need to chase the rally.  Or, retail waking up to how great this bull market has been, concluding that they have been missing out on “free money.”

Truth, I’m not hearing many people at all banging the drum for this rally.  There is a lot of skepticism.

As for me, I don’t care much.  It’s not a core skill of mine, nor is it a part of my business.  I am finding cheap stocks still, and I will keep investing through thick and thin, unless the 10-year forecast model that I use says future returns are below 3%/year.  Then I will hedge, and encourage my clients to do so as well.

Until then, the game is on.  Let’s see how far this streak goes.


Streaks of over 50 days since 1950

Rank Date Streak Year
1 10/8/1963 154 1963
2 2/28/1966 154 1966
3 6/7/1954 142 1954
4 6/3/1964 131 1964
5 4/17/1961 119 1961
6 7/26/1957 115 1957
7 6/12/1985 112 1985
8 5/17/1995 110 1995
9 12/15/1995 105 1995
10 10/30/1967 103 1967
11 5/13/1958 102 1958
12 11/2/1993 95 1993
13 11/24/2006 94 2006
14 2/12/1993 87 1993
15 8/15/1952 86 1952
16 12/20/1968 85 1968
17 2/10/2017 84 2017
18 8/31/1979 82 1979
19 11/30/1964 81 1964
20 6/2/1950 75 1950
21 6/1/1965 75 1965
22 8/23/1972 74 1972
23 5/8/1972 73 1972
24 2/4/1953 70 1953
25 4/24/1962 67 1962
26 7/16/2014 66 2014
27 10/14/1958 65 1958
28 6/10/1969 65 1969
29 12/2/1996 65 1996
30 1/27/2004 65 2004
31 2/3/1994 63 1994
32 1/4/1962 60 1962
33 8/18/1976 60 1976
34 12/20/1985 60 1985
35 9/18/1961 58 1961
36 5/14/1971 58 1971
37 2/9/1989 58 1989
38 7/19/1968 57 1968
39 1/19/2006 56 2006
40 10/18/1951 55 1951
41 9/13/1978 55 1978
42 2/27/1963 54 1963
43 3/29/1977 54 1977
44 6/23/2016 54 2016
45 8/21/1953 53 1953
46 7/11/1960 53 1960
47 11/19/1969 52 1969
48 9/8/1994 52 1994
49 9/8/2016 51 2016
David J. Merkel, CFA, FSA — 2010-present, I am working on setting up my own equity asset management shop, tentatively called Aleph Investments. It is possible that I might do a joint venture with someone else if we can do more together than separately. From 2008-2010, I was the Chief Economist and Director of Research of Finacorp Securities. I did a many things for Finacorp, mainly research and analysis on a wide variety of fixed income and equity securities, and trading strategies. Until 2007, I was a senior investment analyst at Hovde Capital, responsible for analysis and valuation of investment opportunities for the FIP funds, particularly of companies in the insurance industry. I also managed the internal profit sharing and charitable endowment monies of the firm. From 2003-2007, I was a leading commentator at the investment website RealMoney.com. Back in 2003, after several years of correspondence, James Cramer invited me to write for the site, and I wrote for RealMoney on equity and bond portfolio management, macroeconomics, derivatives, quantitative strategies, insurance issues, corporate governance, etc. My specialty is looking at the interlinkages in the markets in order to understand individual markets better. I no longer contribute to RealMoney; I scaled it back because my work duties have gotten larger, and I began this blog to develop a distinct voice with a wider distribution. After three-plus year of operation, I believe I have achieved that. Prior to joining Hovde in 2003, I managed corporate bonds for Dwight Asset Management. In 1998, I joined the Mount Washington Investment Group as the Mortgage Bond and Asset Liability manager after working with Provident Mutual, AIG and Pacific Standard Life. My background as a life actuary has given me a different perspective on investing. How do you earn money without taking undue risk? How do you convey ideas about investing while showing a proper level of uncertainty on the likelihood of success? How do the various markets fit together, telling us us a broader story than any single piece? These are the themes that I will deal with in this blog. I hold bachelor’s and master’s degrees from Johns Hopkins University. In my spare time, I take care of our eight children with my wonderful wife Ruth.
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