Putting the Rally In Perspective

There’s been lots of chatter about the strong start stocks have gotten off to during the first two-and-a-half months of the year.

The Dow’s riding a nine-day winning streak (soon to be 10 if this afternoon’s gains hold) and has been hitting record highs on a daily basis. The S&P 500 is less than five points from its own milestone, people are finally putting cash back into the market and valuations are still cheap, suggesting the rally has more room to run higher.

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But a little perspective suggests there’s some deja vu taking place now compared to years past.�As the chart shows, the 2013 rally continues a pattern that is now in its fourth year running.

Dan Greenhaus, chief global strategist at BTIG, a New York brokerage firm, offers more details:

We must advance one important point to put this in perspective; the S&P 500 is up just short of 9% YTD. That�s a good start to the year no doubt and better than what we saw in 2010 and 2011. But at this point in 2012? The S&P 500 was higher by 11% and as of 46 days into the year, 2013 is exactly where 2012 was. So while ebullience is spreading like wildfire, justified to some degree, there isn�t anything special about this rally, at least that we didn�t see just one year ago.

The Dow recently rose more than 50 points, putting the blue-chip average on pace for its 10th straight day of gains. H-P Chevron and IBM are leading the index higher on Thursday. The S&P 500 added 5 points to 1560 and remains about five points away from its all-time high previously achieved Oct. 9, 2007.

As we noted this morning, this string of consecutive up days has a roulette feel to it. What goes up must go down, yet that phenomenon continues to get put on hold, sort of like what’s been playing out over the last few months.

“Clients are, to oversimplify, getting sucked in as equities continue to drift higher,” Greenhaus says.

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