The Message in the S&P 500's 12-Month Winning Streak

October marked the 12 month in a row of positive total returns for the U.S. and global stock markets. That type of run is remarkable, but not unprecedented. A review of the U.S. stock market going back to 18711510596331305 reveals six streaks where total returns were positive in 12 or more consecutive months, with the longest lasting 15 months between March 1958 and May 1959.

The S&P 500 Index turned in positive total returns in just over 60 percent of the 1,762 months of the past 147 years. Using that as the probability of flipping heads on a biased coin,1510596395949 we can figure out the likelihood that we would have witnessed these six streaks of 12 heads or more over 1,762 independent flips. What we find is that, in our coin-flip thought experiment, the probability of witnessing six or more such streaks is less than 1 percent. Seeing at least one such streak is very likely -- about an 80 percent chance -- but seeing six in 150 years would be extremely improbable.1510596426765