Does Stock Market Momentum Really Matter? History Says So

Rocky White

Wed, December 3, 2025 astatine 7:00 AM CST 2 min read

On Nov. 20, the S&P 500 Index (SPX) was down 4.4% for the month, and it looked arsenic though its six-month winning streak was astir to end. Instead, it rallied implicit the last 10 days of November to eke retired a triumph and widen the streak to 7 months heading into December. With the scale up implicit 20% during the streak, should we interest that the marketplace is overextended? This week, I’m digging into the humanities information to find out.

Since 1950, determination person been 15 erstwhile seven-month triumph streaks. The array beneath summarizes the SPX returns aft 7 consecutive months of gains. The 2nd array shows emblematic returns for comparison. Based connected these numbers, stocks tended to outperform implicit the adjacent 2 to six months, with the adjacent period performing similar a emblematic month. Momentum tends to proceed aft a seven-month triumph streak alternatively than indicating frothiness.

I besides looked astatine however the marketplace typically performs erstwhile a agelong winning streak yet breaks. The information shows the archetypal antagonistic period hasn’t been the commencement of a large unwind. In fact, it’s historically been a reliable buying opportunity. In the 15 anterior seven-month winning streaks, buying the SPX aft the archetypal down period yielded an mean six-month instrumentality of astir 10%, with affirmative returns successful 14 of 15 cases (93%). After respective months of gains, that archetypal losing period tin origin fearfulness that we’re owed for a heavy pullback. But the numbers accidental otherwise. It has usually been a accidental to get into the market, not out.

Finally, here’s the afloat database of seven-month winning streaks for the SPX. In this table, you tin spot the past clip happened successful August 2021, successful which the SPX fell astir 5% the pursuing month. The longest streak was 11 months, which happened doubly -- some instances successful the 1950s.