Historical Analogues Point to Secular Strength

• The S&P 500 is up 18.5% over the last eight weeks.

• This has happened seven other times since 1980.

• The gauge has averaged a 27.1% return 12 months later.

A rally of this magnitude typically shows up when the story is changing…

The best investors are those who can see where the ball is going, not where it is. They're the ones who can shut out all the noise and focus on the signal. Think about Warren Buffett buying American Express during the Salad Oil Scandal in 1963, or Peter Lynch loading up on Chrysler when everyone thought the automaker was headed for bankruptcy. These legends didn't react to headlines. Instead, they anticipated what was coming next.

The current environment is a prime example. The media is caught up in the back and forth of tensions in the Middle East. They're looking for the worst-case outcomes to attract clicks and eyeballs. Yet, despite all the drama, the stock market is breaking out to new highs...

That's because Wall Street is already looking past the current jump in oil prices and the temporary chatter about inflation. Instead, institutional investors are underwriting the potential economic outcome if a deal is secured. Driven by an unprecedented boom in data center infrastructure and the compounding productivity gains of AI, they see a domestic economy on the cusp of an historic expansion.

Yet, yesterday's close marked a rare event. Over the last eight weeks, the stock market has rallied just over 18.5%. Based on what history tells us, even bigger gains lie ahead. That should underpin a steady, long-term rally in the S&P 500 Index.

But don't take my word for it, let's look at what the data's telling us...

One of the advantages of studying the S&P 500 is the sheer depth of historical data. Some patterns show up often and carry modest meaning. Others appear rarely, and carry enormous weight.

After this recent surge, I went back to 1980 to find similar episodes. There were only seven in 46 years: 1982, 1991, 1998, 2009, 2018, 2020, and 2025.

Then I ran the forward returns for the next 3, 6, and 12 months. The results were striking…

As you can see, the S&P 500 averaged a 27.1% price return over the following 12-month stretch. Not too shabby when you consider the average annualized total return since 1928 is 9.7%. In addition, all seven instances have had a positive outcome.

Yet, to truly understand the weight of this signal, we must separate market velocity from market regime. An 18.5% surge over an eight-week window is a violent display of momentum. Historically, this level of velocity happens under two distinct market conditions: Crisis Capitulation or Secular Acceleration. When we segment the seven historical precedents, a stark divergence emerges between recovery rallies and breakout rallies…

Five of the seven historical analogs were massive rubber-band snaps off a market bottom (like the 2009 Financial Crisis and the 2020 COVID crash). But our current setup signals that investors are pricing in a structural shift in macroeconomic fundamentals. The rally is similar to 1991 and 1998 with a parallel catalyst: the convergence of booming data-center infrastructure, accelerating AI productivity, and robust domestic output.

The media remains trapped in a cycle of immediate, headline-driven anxiety, fixated on geopolitical friction and short-term data points. But as renowned economist Milton Friedman famously noted, economic forces operate with "long and variable lags." The market, acting as a discounting mechanism, is already looking past the immediate noise and positioning for the economic reality of 12 to 24 months out.

At the end of the day, markets rarely move in a straight line, and short-term volatility and pullbacks should be expected. However, the macro signal is unambiguous. This is not a fragile, exhausted rally built on speculation; it is a rare, powerful thrust characteristic of a structural secular bull market. While the crowd is glued to the headlines, the smart money is quietly underwriting the next leg of macroeconomic expansion. The signal points to a steady long-term rally in the S&P 500.

Five Stories Moving the Market:

U.S. Trade Ambassador Jamieson Greer said his agency would issue a notice in the Federal Register “shortly” to seek public comments on a Board of Trade with China, a formal step to establish a new mechanism to manage economic relations between the two nations – Bloomberg. (Why you should care – Greer said the Board would seek to reduce at least $30 billion worth of tariffs on “non-sensitive goods” trade)

U.S. Secretary of State Marco Rubio said it could take "a few days" to negotiate a deal to halt the conflict with Iran, after both sides had previously indicated progress on an initial agreement that would end hostilities and restart shipping through the Strait of Hormuz – Reuters. (Why you should care – Strait traffic is expected to return to normal within 30 days of a deal)

At least two non-Iranian supertankers exited the Persian Gulf as commercial shipping through the Strait of Hormuz gained modest momentum over the past 24 hours, the latest mini-flurry in energy flows transiting the vital waterway – Bloomberg. (Why you should care – Iran is likely receiving increased international pressure to strike a deal and restore oil flows out of the Persian Gulf to normal)

The Pentagon is substantially scaling back the forces it plans to send to Europe in a crisis, a fresh step by the Trump administration to shrink its military support for North Atlantic Treaty Organization allies – WSJ. (Why you should care – the move is likely intended to raise pressure on European countries to spend more on defense, potentially forcing them to increase borrowing)

U.S. consumer confidence eased in May as worries about inflation linked to the war in Iran intensified and households' views of the labor market were largely pessimistic, though they anticipated an improvement by the end of ​this year – Reuters. (Why you should care – the survey noted that two-thirds of respondents said they’re cutting back on purchases due to rising prices)

Economic Calendar:

Earnings: A, CRM, DY, HEI, HPQ, MRVL, PSTG, SNOW, SNPS

Reserve Bank of New Zealand Monetary Policy Announcement

Fed’s Logan (Dallas, Voter) Speaks (4 a.m.)

ECB Financial Stability Review (4 a.m.)

U.S. - MBA Mortgage Applications (7 a.m.)

U.S. – ADP Employment Change Weekly (8:15 a.m.)

U.S. – Richmond Fed Manufacturing Index for May (10 a.m.)

Treasury Auctions $28 Billion in 2-Year Floating Rate Notes (11:30 a.m.)

Treasury Auctions $70 Billion in 5-Year Notes (1 p.m.)

Fed’s Cook (Board Member, Voter) Speaks (3:55 p.m.)

U.S. - American Petroleum Institute Crude Oil Inventory Data (4:30 p.m.)

Fed’s Jefferson (Vice Chair, Voter) Speaks (8 p.m.)

ECB’s Lane (Chief Economist) Speaks (8 p.m.)

Fed’s Goolsbee (Chicago, Non-Voter) Speaks (10:25 p.m.)