Strategies: A Stock Market Winning Streak Has Drawn Few Cheers

At first, no one noticed his perfect attendance record. But thanks to the obsessive data crunching of baseball statisticians, people eventually began to celebrate. That unbroken string of games turned into the Streak — 2,632 consecutive games, a run of lunchbox heroism that shattered the seemingly unbreakable, 2,130-game record of Lou Gehrig, the fabled Iron Horse of the Yankees.

Baseball’s legions of statisticians have made it easy to track Ripken’s achievements — as well as those that are far more obscure. (Who held the Orioles’ club record for most consecutive games until Ripken broke it on May 4, 1985? Does anyone care? No matter, it’s in the books: Brooks Robinson, another superstar infielder, with 463 games.)

Making money is, arguably, the true national pastime of the United States. While the financial game isn’t always analyzed with quite the same élan as baseball, Paul T. Hickey, co-founder of the Bespoke Investment Group, has unearthed a noteworthy financial streak — one that is still under most people’s radar.

Each day in 2012, as well as in these early days of 2013, he says, the Standard Poor’s 500-stock index has closed in positive territory for the calendar year. Here’s another way of putting it: In 2012, the index never had a daily close below the closing level for 2011. And despite endless worries about the so-called fiscal cliff, the streak lives on.

How unusual is this?

“Going back to 1928, there have only been eight other years where the index went an entire year of trading up year-to-date every single day,” Mr. Hickey says. The last time was in 1979.

The odds that the current streak will be sustained through a second calendar year are quite low. Since 1928, it’s happened only once — in 1975 and 1976, a period not remembered as being particularly strong for equities.

Today, many people don’t see the market as worth the bother, either. “Although the current bull market is approaching four years in duration, if you talk to the average investor, many will not even call it a bull market,” Bespoke wrote last week in its annual report on the markets. “In 2012, the S. P. 500 was up by more than 10 percent, but if you asked most casual observers how the market was doing, they would probably tell you that it was flat, or maybe even down.”

That may help explain why the current streak hasn’t received more attention, Mr. Hickey said in an interview. Cogitating about it may induce cognitive dissonance, because the streak attests to the market’s consistently strong performance while many wise commentators have been stressing the market’s uncertainty and turbulence.

“The numbers don’t lie,’ Mr. Hickey said. “We’ve been having a bull market streak when many people don’t even realize we’re in a bull market.”

The reasons for the market’s persistent buoyancy may not be appealing, Mr. Hickey said. It’s possible that stocks have performed well primarily because of the expansive monetary policy of central banks and because of governments’ heightened intervention in the financial system and the economy.

“But whatever the reasons,” he said, “if you bought stocks in March 2009 at the bottom of the market, you can sell them today at a tremendous premium.”

In fact, a $1,000 investment in an S. P. 500 index fund made in March 2009 would be worth more than $2,000 today.

Yet many investors are “disconnected from the stock market these days and that’s understandable,” Mr. Hickey said, given the enormous losses suffered in the financial crisis and in the collapse of the Internet bubble less than a decade before that.

The current rally may still have legs precisely because many investors have so far failed to participate in it. They may become reaccustomed to the idea that stocks can be very profitable, he said.

Article source: http://www.nytimes.com/2013/01/06/your-money/a-stock-market-winning-streak-has-drawn-few-cheers.html?partner=rss&emc=rss