When 3 and 10 Add Up to 18: A Closer Look at the 2023 Market Rally


The year 2022 was a tough one for the market, with a significant decline of 19.4% in the S&P 500. However, 2023 has brought about a remarkable turnaround, with the index climbing over 18% since the beginning of the year. While this surge in performance is certainly encouraging, it is important to note that it was driven by a select few days.

It is no secret that Big Tech stocks have been the primary drivers of the market’s gains in 2023. These tech giants, including Tesla (TSLA), Nvidia (NVDA), Meta Platforms (META), Apple (AAPL), Microsoft (MSFT), Alphabet (GOOGL), and Amazon.com (AMZN), have played a pivotal role in propelling the market forward. While there are signs of the bullishness spreading to other stocks, concerns remain regarding the sustainability of the market’s momentum, given its reliance on a narrow group of winners.

According to Nicholas Colas, co-founder of DataTrek Research, the success of this year’s rally can be attributed to just 10 trading days out of a total of 137. On these 10 days, the S&P 500 experienced double-digit gains, accounting for 96% of the year-to-date gains. These standout trading days have delivered a total price return of 17.4%.

When examining the entire span of 137 trading days in 2023, it becomes apparent that the line between success and failure is thin. Out of these days, 74 have been up days for the S&P 500, while 63 have been down days. This means that there have been only 11 more up days than down days this year. Surprisingly, these 11 best days have resulted in a price return of 18.8%, surpassing the total gains for the entire year.

While the current market rally has been remarkable, it is crucial to remain vigilant and monitor the market’s dependence on a small number of winners and select trading days. As the year progresses, investors will continue to assess the risks and opportunities presented by this narrow foundation of gains.

The Year’s Market Internals: A Bullish Market Outlook

Last year, the stock market experienced bear-market losses that were primarily concentrated in just five trading days. These five days perfectly encapsulated the market’s concerns about rising prices, the Federal Reserve’s attempts to control inflation, and the challenges of predicting corporate profits in the near term.

According to market expert Colas, if we view the market through the lens of these turbulent days, all investors really need is a slight majority of up days compared to down days in the remaining 113 trading days to sustain the current rally.

Thus far, the market has seen ten significant bull days, driven by three key catalysts: resilient U.S. labor market performance despite cooling inflation, impressive earnings results from Big Tech companies, and effective responses from both public and private sectors in resolving the March banking crisis.

However, it’s worth noting that these positive factors may already be factored into current valuations. Some argue that for the market to continue pushing higher, new reasons are required, such as better-than-expected earnings or increased enthusiasm around artificial intelligence (AI).

Colas agrees and highlights Big Tech’s importance in sustaining the momentum. Not only do these companies account for nearly 40% of the S&P 500 index, but their continued success could also reignite optimism surrounding AI. In addition, a positive signal from the Federal Reserve indicating satisfaction with declining inflation could further boost investor confidence.

Despite the valid concerns of those anticipating a downturn, Colas believes that the market’s current state suggests a bullish or at least a bullish “ish” outlook. The slightly higher number of up days compared to down days aligns with the classical definition of a bull market.

All in all, the market has held up well so far, leaving investors cautiously optimistic.

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