Is S&P 500’s Nine-Day Rally a Signal of a Market Crash? 16% Surge in Two Months. Will S&P 500 Rise Further After SpaceX IPO?

TradingKey - On June 2, Eastern Time, the three major U.S. stock indices reached new all-time highs, marking the first time since February 2017 that all three benchmarks have set record closing highs for five consecutive trading sessions. The S&P 500 has now risen for nine straight sessions, marking its longest winning streak in over a year.

In the two-month period ending in late May, the S&P 500 surged 16%. Deutsche Bank analysts noted that such a rally has occurred only four times since World War II. Three of those instances were rebounds following major crises; however, the remaining instance—a robust gain during a non-recessionary period that mirrors current market conditions—occurred just before the 1987 crash, which may serve as a warning sign.

Given expectations for the continued evolution of the AI boom, should investors buy into the S&P 500 now or take profits? Furthermore, what impact will SpaceX's upcoming IPO in June have on the S&P 500, and what strategy should investors adopt to profit from it?

Why did the S&P 500 Index rise in 2026?

The S&P 500's robust rally over the recent period has been primarily driven by the surge in tech stocks amid the AI craze. Analysts have pointed out a severe sector divergence, noting that the "breadth" of the U.S. equity rally is insufficient, characterizing an extremely narrow bull market propelled solely by technology shares.

According to data released by FactSet on Tuesday, the S&P 500 has risen more than 11% year-to-date, with the information technology sector surging over 27% as the primary engine for the index. Bespoke Investment Group stated that from March 30 to this Monday, tech stocks within the S&P rose by more than 45%, while the index itself gained only about 20%. Bespoke further noted that among the 50 best-performing S&P constituents since the March 30 low, 38 were from the tech sector; 23 of the top 25 were tech stocks, and the top 13 were all from the tech sector.

Ned Davis Research strategist Rob Anderson stated on X that the proportion of constituents outperforming the S&P 500 over the past two months has fallen to its third-lowest level since 1972, further illustrating the severe lack of market breadth in the U.S. stock rally.

During this period, the market capitalization of leading mega-cap tech companies grew rapidly, such as Micron Technology (MU) surpassing a $1 trillion valuation, and Nvidia (NVDA) CEO Jensen Huang also predicted that Marvell (MRVL) would be the next semiconductor stock to reach a $1 trillion market capitalization.

Is the S&P 500 Rally a Danger Signal? Deutsche Bank Issues Risk Warning!

Deutsche Bank noted that the S&P 500's current staggering rally has occurred only four times since World War II, three of which were backed by clear justifications: the post-COVID bounce in April-May 2020, the recovery following the Global Financial Crisis in March-April 2009, and the market rebound after the first oil crisis in January-February 1975. These three surges were all attributed to buying as economic crises receded.

However, Henry Allen, a macro strategist in the firm's research department, pointed out on Monday that because the economy is not currently emerging from a recession, the pace of the stock market's gains is shattering all recent precedents. This is heightening anxiety for those already wary of the market, particularly given the numerous risks still lurking in the current environment.

How do Federal Reserve rate hike expectations affect the S&P 500 Index?

One of the risks is the potential for the Federal Reserve to hike interest rates this year. Deutsche Bank noted that although economic pressures have weighed on consumer savings rates—which are now at lows seen only briefly before 2022 and the 2008 financial crisis—corporate credit spreads continue to tighten.

Corporate credit spreads refer to the yield differential between corporate bonds and Treasuries of the same maturity, with the latter generally considered the risk-free rate. As a barometer of the macroeconomy and financial markets, tightening spreads indicate lower corporate bond yields and suggest that the market perceives a low risk of corporate default, reflecting a high risk appetite.

The simultaneous tightening of household savings rates and corporate credit spreads is an anomaly that indicates a clear divergence between financial markets and the real economy: the consumer momentum driving economic growth is waning, yet financial markets have yet to take notice and continue their revelry.

Under these circumstances, if the Fed chooses to raise rates, it would immediately shatter the credit market's optimistic expectations, and the spike in borrowing costs would overwhelm small businesses. Furthermore, rate hikes would increase interest expenses for households with low savings, further dealing a blow to consumption. Under this dual pressure, U.S. equities, currently at high valuations, would be hit hard.

How the outlook for US-Iran conflict impacts the S&P 500 Index?

Geopolitical issues also remain unresolved. While oil prices have been relatively stable recently, any turbulence could trigger sharp market volatility. Deutsche Bank's Allen noted that the duration of the Strait of Hormuz's closure has already exceeded investor expectations; if it remains closed, the sustainability of oil price stability is in question. The current rally in U.S. stocks is fundamentally built on the crucial pillar of market expectations for a future decline in oil prices; once these expectations reverse, U.S. equities will come under immense pressure.

SpaceX IPO Imminent: Will the S&P 500 Continue to Rally?

The upcoming SpaceX IPO in June will be the most significant medium-term factor influencing the trajectory of the S&P 500.

The core reason why the SpaceX IPO will impact the S&P 500 is that the index has modified its rules: under the new guidelines, the inclusion speed for mega-cap companies has been accelerated, shortening the listing observation period for large-cap companies from 12 months to 6 months, and most importantly, waiving the requirement for sustained GAAP profitability. This means that given SpaceX's massive valuation, it is expected to be included in the S&P 500 just six months after listing, even if it continues to face substantial losses at that time.

If weighted by total market capitalization rather than float-adjusted market cap, SpaceX—at a valuation of $1.75 trillion—would account for 2.4% of the S&P 500's total market value. Its volatility would then significantly impact the index's movements, making it one of its most critical components.

Furthermore, even before SpaceX is included in the S&P 500, the index already contains numerous SpaceX-related stocks, such as EchoStar, which holds an approximately 2%-3% stake in SpaceX, (SATS) , Tesla, which is also controlled by Elon Musk, (TSLA) , Starlink partner T-Mobile US (TMUS) , and Google, a major shareholder in SpaceX, (GOOG) (GOOGL) , among others.

In addition to the S&P 500, the Nasdaq 100 is also a convenient vehicle for investing in SpaceX. Nasdaq's newly launched fast-track entry mechanism allows newly listed companies with market caps ranking in the top 40 of its components to apply for inclusion as early as the seventh trading day after their IPO, offering a significantly shorter waiting period than the S&P 500.