The S&P 500 Just Did This for the 13th Time in the Past 50 Years; Here's What History Says Happens Next
Key Points
The S&P 500 was up 10% in April. Double-digit growth in a single month has occurred only 13 times in the past century, and only the fourth time in the past 30 years.
History suggests that May growth could be hit-or-miss, but the long-term outlook is much more positive.
On average, the S&P 500 delivers double-digit returns in the six- and 12-month periods following a 10%-plus month.
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U.S. stocks just wrapped up a fantastic April. The State Street Technology Select Sector SPDR ETF (NYSEMKT: XLK) finished the month up 20%, only the second time the fund has posted that kind of monthly return since its inception in late 1998 (it gained 24% in October 2002).
The S&P 500 (SNPINDEX: ^GSPC) didn't do quite as well, but it gained 10.5% itself thanks to that big rally in tech. If there's a downside to this, it's that the tech sector was the only sector to outperform the S&P 500 in April. It's still good news for the majority of investors, even if it wasn't quite so good for those who had been repositioning themselves for the market rotation earlier this year.
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A monthly gain of 10% or more for the S&P 500 isn't unprecedented, but it's rare. Over the past 50 years, April 2026 is only the 13th occasion on which this has occurred.
The natural inclination might be to assume that, after such a strong rally, the index is due for a pause or even a decline. History suggests that this might be true in the short term. Over the long term, however, it might be more of a momentum signal.
Image source: Getty Images.
What happens to the S&P 500 following a strong rally?
This is the first time the S&P 500 has gained at least 10% in a single month since the COVID-19 pandemic, when news of working vaccines emerged in November 2020. Before that, you'd have to go back to 2011. Prior to that? 1991.
Given its rarity, investors don't want to put too much credence in it because it's such a small sample size. But there are some potentially interesting findings regarding market performance if we look at past occurrences.
| Month | Return | 1M Fwd Return | 3M Fwd Return | 6M Fwd Return | 12M Fwd Return |
|---|---|---|---|---|---|
| Apr 2026 | 10.4% | ||||
| Nov 2020 | 10.8% | 3.7% | 5.2% | 16.1% | 26.1% |
| Apr 2020 | 12.7% | 4.5% | 12.3% | 12.3% | 43.6% |
| Oct 2011 | 10.8% | -0.5% | 4.7% | 11.5% | 12.7% |
| Dec 1991 | 11.2% | -2% | -3.2% | -2.2% | 4.5% |
| Jan 1987 | 13.2% | 3.7% | 5.2% | 16.3% | -6.2% |
| Aug 1984 | 10.6% | -0.4% | -1.9% | 8.7% | 13.1% |
| Oct 1982 | 11.1% | 3.6% | 8.7% | 23% | 22.4% |
| Aug 1982 | 11.6% | 0.8% | 15.9% | 23.9% | 37.6% |
| Nov 1980 | 10.2% | -3.4% | -6.6% | -5.6% | -10.1% |
| Jan 1976 | 11.9% | -1.2% | 0.7% | 2.5% | 1.1% |
| Jan 1975 | 12.2% | 6% | 13.4% | 15.3% | 31% |
| Oct 1974 | 16.4% | -5.3% | 4.2% | 18.1% | 20.4% |
Data source: Author calculations based on data from Yahoo Finance.
First, it's worth noting that prior to April, a double-digit gain in the S&P 500 has happened only three times in the past 30 years. Most occurred during the 1970s and 1980s, when the market environment and economy were very different. We should probably take all results with a grain of salt.
That said, the results, taken as a whole, suggest a couple of things.
| Metric | Return | 1M Fwd Return | 3M Fwd Return | 6M Fwd Return | 12M Fwd Return |
|---|---|---|---|---|---|
| Positive returns | 13 | 6 | 9 | 10 | 10 |
| Negative returns | 0 | 6 | 3 | 2 | 2 |
| Average return | 11.8% | 0.8% | 4.9% | 11.7% | 16.3% |
| Median return | 11.2% | 0.2% | 5% | 13.8% | 16.8% |
| Best return rate | 16.4% | 6% | 15.9% | 23.9% | 43.6% |
| Worst return rate | 10.2% | -5.3% | -6.6% | -5.6% | -10.1% |
Data source: Author calculations based on data from Yahoo Finance.
Here are some of my observations regarding these results:
- The odds of a positive return in the month following are basically a coin flip, which is below average compared to the odds of a positive return in any random month. This suggests there will likely be a pause or digestion period following these rallies.
- Returns start to turn above average again three months out. The average return of about 5% in the subsequent three months is solid, considering that the long-term average annual return for the S&P 500 over a full year is about 10%.
- Index returns remain above average in the six-month and 12-month forward-looking periods. The success rate is more than 80%.
Overall, this suggests not only that there's still potential for positive performance going forward, but also for significantly above-average returns.
A 10% monthly return could signal the start of a longer-term positive momentum cycle for stocks, rather than an indication that stocks have become overbought.
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David Dierking has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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