MoneyLife with Chuck Jaffe
LPL's Turnquist: Market's Winning Streak Portends Strong Run to Year's End
Why It Matters
Understanding the dynamics behind the current market rally helps investors gauge whether to stay the course or adjust risk exposure as the summer brings potential choppiness and geopolitical uncertainty. The discussion also underscores broader financial health concerns, such as inflation‑eroding savings and the pitfalls of relying on short‑term credit solutions.
Key Takeaways
- •S&P 500 logged nine-week winning streak, rare historic pattern.
- •Median six‑month return after such streaks about 8 percent.
- •Mega‑caps drive gains; market breadth remains thin, raising risk.
- •AI sector earnings surged 50 % Q1, fueling market optimism.
- •Summer may see choppy trading, but post‑midterm gains average 17 %
Pulse Analysis
The S&P 500 just closed a nine‑week winning streak, a pattern seen only ten times before. Historical data shows a median six‑month gain of roughly eight percent after such runs, underscoring the power of momentum. Yet the rally is heavily concentrated in mega‑cap names, leaving market breadth thin and exposing the index to a potential pullback if that concentration wanes. Technical analysts view the current chart as bullish but caution that a near‑term consolidation, especially in semiconductor and memory stocks, could test the rally’s durability.
Technology, and specifically artificial‑intelligence spending, is the engine behind the latest earnings surge. Q1 tech earnings jumped 50 % year‑over‑year, driven by hyperscaler investments and expanding AI adoption across sectors. While healthcare and other industries lag with roughly 35 % adoption, the overall AI spend is already a sizable component of GDP, outpacing traditional consumer consumption. This spending momentum supports higher valuations, but analysts warn that future scrutiny will focus on the return on AI capital as the hype cycle matures.
Looking ahead, summer is expected to bring choppy price action, a typical pattern before the midterm elections. Historical midterm cycles have delivered an average 17 % market gain in the following year, suggesting that reduced political uncertainty can boost equity performance. However, geopolitical risk remains, especially the unresolved Strait of Hormuz tension that could swing oil prices around the $86 per barrel mark. Investors are advised to view dips as buying opportunities, given limited retail participation and ample capacity for further inflows once confidence stabilizes.
Episode Description
Adam Turnquist, chief technical strategist at LPL Financial, says it's "hard to argue" with a stock market that has returned to record high levels on the back of a 9-week winning streak for the Standard and Poor's 500. Turnquist says that kind of streak has only happened 10 times before, with the momentum leading the market higher a median return of 8 percent six months after the streak. Turnquist added a note of near-term caution, saying he will not be surprised to see some summer consolidation, particularly in the technology space, but he made it clear that he expects those temporary declines to be buying opportunities.
In The Big Interview, Ron Deutsch, head of portfolio strategy at Magnus Financial Group, discusses why investors who are scurrying for safety, wanting to reduce their fears are pursuing strategies that may come up short under the pressure of today's markets. He discusses how balancing risks may involve moving money to areas that safety-first investors think are high risk — but which the market has shown to be relatively safe — without going too far to the end of the spectrum.
Tiana Patillo, financial advisor manager at Vanguard, discusses a recent survey by the firm, which found that more than 70% of women say they are confident about saving money, yet nearly half of them acknowledged that their savings may not be keeping pace with inflation.
And speaking of inflation, Chuck answers a listener's question about whether his son's use of "buy now, pay later" programs at the gas pump makes any financial sense at all.
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