The S&P 500 has just closed out its third straight month of gains, although it has conspicuously failed to rise above the record high it hit in May of 2015. Yet according to one market strategist, record highs, like revenge, are best served cold.
"We have to get back to breakeven or get back above the 2,131 closing level before we can say that the correction is over," and based on that analysis, this current correction is "the fifth longest since World War II," according to Sam Stovall, U.S. equity strategist at S&P Global.
When he looked back at history, he found that once the S&P breaks above its previous closing high, it tends to rise 9.5 percent. However, when corrections last at least as long as the current one has, a 13 percent rise above the record becomes more likely, says Stovall.
"History is a great guide, it's never gospel. But I think what it does imply is that we can expect higher prices should we get back to breakeven," Stovall said Tuesday on CNBC's "Trading Nation."
Stovall doesn't minimize market concerns, which primarily center around slow global growth, high valuations based on historical averages and the prospect that rates will rise thanks to actions by the Federal Reserve. However, he would retort that "the boxer is rarely felled by the punch he expects," and any Fed move will be well-telegraphed by the time it happens.
Further low rates and slow growth mean that "there really is less of a substitution effect" in terms of "other asset classes being attractive alternatives." And outright recession seems unlikely, at least due to impressive housing starts.
In Stovall's view, a turnaround for the market and fresh record highs will come eventually — and once they do, a major rally from those levels is likely.