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Analyzing Momentum: The Impact of S&P 500's ROC on Future Market Dynamics

March 21, 2024

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The S&P 500's recent Rate of Change (ROC) of 20% over a four-month period presents a notable case for analysis. Key take away - strength begets strength. S&P is positive 100% of the time, 6 Mo, 9 Mo, and 12 months out. Average drawdown over the next year is roughly 10% which outperforms the average yearly drawdown of 13% since 1985. Statistically, the strong ROC outperforms on a return basis as well as drawdown.

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This, along with the analog for when Nov, Dec, Jan & Feb are positive, suggests if the analogs hold, we should see decent performance over the next year with better-than-average drawdowns.

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*All data sourced from Bloomberg

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