The Dow has now increased for the twelfth day in a row. Since 1900, the Dow has achieved this feat on only three other occasions—once in July of 1929, again in December of 1970, and then finally in January of 1987.
The good news is that on all three occasions, the Dow went on to rally double-digits.
The bad news: those gains didn’t last.
Stocks crashed hard in 1929 and in 1987. The best year out of the bunch was 1970 when over the subsequent 12 months, stocks rallied and then corrected, but never fell far below their December 1970 level.
A sample size of three doesn’t provide a reliable foundation for inference about future returns, but a 12-day winning streak does indeed signal an extreme level of investor euphoria.
Jeremy Jones, CFA
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