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S&P History Points to Great Year for Stocks: Strategist

The market just posted the best first quarter results in more than a decade. Could the good times possibly continue?

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In a word, yes—say those who look at history as a guide.

In the first quarter this year, S&P 500gained 5.42 percent. As Ryan Detrick, senior technical analyst at Schaeffer’s Investment Research pointed out, a strong first quarter is usually a good omen.

“Since 1987, there were only four other times we gained 5 percent, and it’s extremely bullish for the rest of the year,” Detrick said.

That’s because each time the broad market index has risen 5 percent or more in the first quarter, the returns for the index averaged 16.4 percent the rest of the year, Schaeffer’s research shows.

In these instances, the S&P 500 also returned 2.19 percent on average in April, according to Schaeffer's.

If the time frame is extended back to 1975, the S&P gained 8.7 percent on average in the rest of the year after a first quarter with gains of 5 percent or more, the research shows. And stocks were positive 91 percent of the time, Schaeffer says.

And here’s another fact: For the last five years, no matter what happened in the first quarter, returns in April were positive, with the S&P 500 gaining 4 percent or more, Detrick said.

“We’ve noticed some trepidation about earnings season,” which begins in April, said Detrick.

“We would not be shocked if we have an upward surprise in earnings season, and that could be a major catalyst to higher prices in April.”

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Disclosures:

No disclosure information was available for Detrick.

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