In a report released on Tuesday, Bank of America's technical analyst Stephen Suttmeier pointed out that the S&P 500 had recorded 12 consecutive months of positive year-over-year gains.
This means that from March 2023 to March 2024, the S&P 500 experienced a positive year-over-year return each month. This positive trend stands in stark contrast to the previous year, when the S&P 500 had 12 consecutive months of negative year-over-year gains, from April 2022 to March 2023.
Suttmeier noted, "April 2023 broke this bearish streak with a positive YoY return. We viewed this as a bullish backdrop signal for US equities, and the SPX has rallied over 20% since then."
Despite the recent weakness in the stock market, with the S&P 500 declining by about 4% in April, this positive signal indicates that the long-term trend in stocks remains positive. This suggests that there may be further gains ahead.
Suttmeier mentioned that based on historical averages, the streak of positive returns could extend from the current 12-month period to 20 months, resulting in a 17% gain for stocks. Additionally, the median streak of positive returns could extend to 17 months with a gain of 14%, based on historical data.
This analysis implies that the S&P 500 could reach 6,000 by August 2025, and potentially as high as 6,150 by November 2025.
However, in the short term, Suttmeier advised investors to monitor potential support levels for the S&P 500 at 5,000 as well as a range from 4,600 to 4,800.
These support levels indicate a potential decline of up to 9%, suggesting that the current risk/reward profile for stocks remains favorable.
