One heck of a rally!

The Rally

This past week marked the fifth consecutive week that the S&P 500 posted a positive return.The S&P 500 increased more than 25 percent during that five week interval and almost 27 percent since its low on March 9th.

To put this rally into perspective, I went back and looked at weekly returns on the S&P 500 index since January 1950. Since 1950, there have been 90 intervals in which the market was up for at least 5 consecutive weeks. As the graph to the right indicates, it has been one heckuva rally!

The Rout

The rally of the past five weeks follows four consecutive weeks of market decline during which the market fell 21 percent. Since January 1950, there have been 71 intervals with at least 4 consecutive weeks of negative returns. The chart below shows how the most recent bear interval compares with past intervals.

The Lesson

These charts underscore a vital lesson for investors: trying to time the market is a treacherous business. When the market is getting crushed the urge to sell everything and run for cover can be overwhelming, but it is almost always a big mistake. Market rallies and market routs almost always even out over time. It is much wiser to follow a savings and investment program that is suited to your particular situation.