The Nasdaq Composite gained at least 1% for four straight trading days in late July and early August, a streak the index has produced only 18 times since it launched in 1971. In the 17 prior instances, the Nasdaq averaged a 29.3% gain over the following year, according to Bespoke Investment Group, though rate hikes and stretched valuations could complicate a repeat.
The Nasdaq Composite has rallied at least 1% for four consecutive trading days, a feat achieved only 18 times since the index's inception in February 1971. According to Bespoke Investment Group, the previous 17 instances have, on average, been followed by sizable one-year gains.
A rare four-day streak
Over the four sessions beginning July 30 and ending Aug. 4, the Nasdaq gained at least 1% each day, rebounding from a July slide toward correction territory. As of the close on Aug. 6, the index was up 13.4% for the year.
The S&P 500 and Dow Jones Industrial Average also had strong years, though they trailed the Nasdaq: the S&P 500 gained 12.6% and the Dow 12.1% over the same period.
History points to a 29.3% average gain
According to data from Bespoke Investment Group, the Nasdaq has climbed by an average of 29.3% in the year following the previous 17 four-day, 1%-plus streaks, more than double its average annual return of under 11% over the last 55 years. History can never guarantee what comes next, but if the pattern holds, the Nasdaq could climb above 34,000 by August 2027.
What could break the pattern
That outcome depends on several things going right. The AI infrastructure buildout, partly financed by debt, would need to keep expanding, but Federal Reserve rate hikes could raise borrowing costs and slow that spending.
Corporate earnings would also need to keep beating expectations: the S&P 500's Shiller valuation ratio neared 43 in early June, the second-priciest stock market on record. Overseas volatility, including meme-stock-like swings in South Korea's KOSPI, adds a further risk to the rally.
Source: The Motley Fool
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