Not since the bull market began has buying dips in the Standard & Poor’s 500 Index been a surer way of making money.
Declines in the benchmark gauge for American equity are lasting an average of 1.5 days in 2014, the shortest since at least 2009, according to data compiled by Bloomberg. Starting last year, returns on days after the index fell have averaged 0.13 percent, the highest since they were 0.38 percent in 2009.
The ease with which equities are shaking off bad news is emboldening investors and may explain why some of the biggest rallies of the year have come amid geopolitical crises.
While Marc Faber, publisher of the Gloom, Boom & Doom report, says it represents euphoria usually confined to market tops, the strategy worked over the last two weeks amid escalating tensions in Ukraine and the Gaza Strip.
“Folks have been waiting for a big correction for some time now––where is it?” Brian Barish, president of Denver-based Cambiar Investors LLC, which oversees about $11 billion, said in an interview July 22. “However horrible it all was from 2007 to 2009, it is now that amazingly bullish.”
Rising earnings from Apple Inc., Biogen Idec Inc. and Chipotle Mexican Grill Inc. last week helped send the S&P 500 to its 27th all-time high this year. More than $15 trillion has been added to U.S. equity values as the S&P 500 almost tripled from a 12-year low in 2009, fueled by monetary stimulus from the Federal Reserve, a five-year economic expansion and record corporate profits.
Losing streaks in the U.S. equity market are getting shorter. The S&P 500 has posted no declines that lasted more than three days in 2014, compared with an average of nine a year since March 2009, data compiled by Bloomberg show.
Drops this quarter have lasted 1.2 days, down from 1.5 days in the previous three months and about half the length in 2012. The number of losses has stayed roughly the same as in the past. There have been 59 down days this year, compared with an average of 61 during the same time period since 2011.
“Almost any time you see a hint of a pullback in the market, money seems to come flooding in,” Timothy Ghriskey, who helps oversee $1.5 billion as chief investment officer for New York-based Solaris Asset Management LLC, said in a phone interview July 22.
On July 10, the S&P 500 fell 1 percent in the first half hour of trading on signs of financial stress at a Portuguese banking company. Bulls stepped in and the index pared losses during the day. The index fully recovered July 14.
The downing of the Malaysia Airlines plane and Israeli military strikes sparked a 1.2 percent drop in the S&P 500 July 17. It rebounded 1 percent the next day.
On March 3, the index slid 0.7 percent on concern Russia’s support of separatists in Ukraine could lead to a larger conflict. Stocks rallied the next day, sending the S&P 500 up 1.5 percent, the biggest one-day gain of the year.