The S&P 500 typically sees a ‘post-high five’ move after hitting a record, CFRA says

Published Mon, Jan 22 202410:46 AM ESTUpdated Mon, Jan 22 202412:04 PM EST

The S & P 500 is officially in a bull market, and that means the broader index could soon see another leg up from here, according to CFRA Research. The broad market index last week bested its previous record high from January 2022, recovering all its losses from the recent bear market, even as the 10-year Treasury yield and oil prices continued to rise. Historically speaking, that's a promising sign for equities, said Sam Stovall, chief investment strategist at CFRA. "If history is any guide, for it's never gospel, investors should prepare for a 'post-high five,' or a possible advance of 5% before pausing to digest recent gains," Stovall wrote in a Monday note. Since World War II, there have been 14 bear markets, 11 of which were "garden variety bears," while just three were "megameltdowns," the strategist said. The former are bear markets of 20% to 39.9%, while the latter are declines of 40% or more. The most recent bear market was a garden variety bear, Stovall said. The decline, which lasted roughly 15 months from its October 2022 low, took 25.4% of the S & P 500 value from peak to trough. Regardless of what kind of bear market it was, a post-high five move still took place once a bull run was confirmed. The S & P 500 gained 5% on average over the following two to two-and-a-half months. After that, the S & P 500 has averaged a decline between 6.8% and 8.7%, depending on the type of bear market that preceded the bull run. Still, Stovall noted, "While these declines have ranged from as shallow as 5.1% to as deep as 14.0%, the good news is that none became a new bear market." That doesn't mean the market couldn't start to consolidate soon after the record high, Stovall said. He highlighted four times in market history when equities pulled back within two weeks of a record. Stovall also expects the market's gains will have to extend to other sectors for investors truly to have confidence. He noted the S & P MidCap 400, S & P SmallCap 600 and Russell 2000 are all more than 10% below their previous record highs. "It would put a lot of investors' minds at ease should this market continue to climb through January, thus triggering a positive full-year expectation," Stovall wrote. — CNBC's Michael Bloom contributed to this report.