(Bloomberg) -- The equity rally greeting investors in the new year is reaching into uncharted territory. That isn't necessarily great news.
Up every day and reaching a record each time, the S&P 500 just did something unprecedented. According to Sundial Capital Research, no year has ever begun with consecutive 0.5 percent gains in the S&P 500, each to fresh 52-week highs. With the advance approaching 2 percent over three days, the benchmark is on course for the best start since 2013.
More impressive is the performance of tech stocks, 2017's biggest winner and a group that some worried could be vulnerable to profit taking as fund managers rotated to the previous year's laggards. Instead, the Nasdaq 100 has jumped 3 percent, the strongest rally to start a year since 2003.
“Just when we thought all of the feel-good, bullish scenarios couldn't persist, 2018 has begun with yet another one,” Frank Cappelleri, a senior equity trader at Instinet LLC, wrote in a note to clients.
How long will it last? According to Sundial, the stock market may face some short-term setbacks if history is of any guide.
Three other years started on almost as good a note as 2018 has. In 2010, the S&P 500 managed to rise for a few more sessions before suffering an 8 percent retreat through mid-February. A similar breakdown occurred in 1945 and 1959 as well.
“The overall pattern is some weakness over the shorter-term, with further immediate gains usually being given back,” said Jason Goepfert, president of Minneapolis-based Sundial.
To contact the reporter on this story: Lu Wang in New York at lwang8@bloomberg.net.
To contact the editors responsible for this story: Jeremy Herron at jherron8@bloomberg.net, Chris Nagi
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