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“It is now life and not art that requires the willing suspension of disbelief.” – Lionel Trilling
Growing up, I was a huge baseball fan and at the same time was fascinated by math and numbers. Naturally, I devoured the many statistics that came along with America’s pastime: batting average, earned run average, on-base percentage, slugging percentage, etc. I could rattle off any of these stats for the league leaders and every player on my favorite team, the Mets (yes, the Mets; have some compassion Yankee fans).
I also loved studying the history of the game, learning of the great players of the past and the many records they had set. While most kids were enamored with the home run record of 61 set by Roger Maris (in 1961, of course), I was always more intrigued by another record: the consecutive game hitting streak. The extraordinary consistency of this record stood out to me as a much more remarkable feat.
On May 15, 1941, “Joltin’” Joe DiMaggio went one-for-four in a game against the Chicago White Sox. It was just an ordinary game, except for fact that it was the start of what was to become known as simply “The Streak.” DiMaggio would go on to hit safely in each of his next fifty-five games, with the streak finally ending on July 17, 1941. DiMaggio’s fifty-six game hitting streak pulled the Yankees out of an early-year slump, and led them to an eventual World Series win.
“The Streak” is one of the few major league records that still stands today. Many have tried to best the record over the years but have fallen short, with Pete Rose’s forty-four consecutive games in 1978 as the closest attempt in recent history.
Interesting, you say, but what does any of this have to do with the current market?
Everything, if you step back for a moment and reflect on what we have achieved since November 21, 2012. On that otherwise ordinary day, the S&P 500 first crossed above its 200-day moving average from below it. This was the equivalent of DiMaggio’s first hit in May of 1941.
The S&P 500 has remained above its 200-day moving average each and every trading day thereafter. Since the S&P 500 went to its present form of 500 stocks in March 1957, there has never been a longer run in history. At a current total of 390 days and counting, it has broken the prior record of 385 trading days set in 1995-96 and 1963-65.
From my perspective, this is the DiMaggio hitting streak of markets. Some might challenge this notion with the 80+% gain for the Nasdaq Composite in 1999 or the five consecutive 20+% years (total return) in the S&P 500 from 1995-1999. These are incredible feats, for sure. But the consistency of a steady advance, day in and day out, in my subjective view is more impressive.
What can we take away from this streak, if anything?
First, when you are operating in markets that are driven in large part by human emotions and sentiment, you need to have the ability to suspend disbelief. This is easier said than done, of course, as we are inherently skeptical beings. My colleague Michael Gayed is often saying “nothing surprises me.” I’m usually with him on this but for some reason this one still did, just as I will be surprised if DiMaggio’s record is ever broken. I always viewed the 1995-96 period as untouchable, but here we are today.
Second, the fact that the market seems as if it will never go down again is not lost on investors today. They may not know about the 200-day MA streak, but they know that stocks are hitting new all-time highs almost daily with little volatility. The famous “Wall of Worry” has been broken into pieces, as I wrote about in my last post. This extreme optimism tends to lead to a more difficult market environment going forward.
Third, don’t assume that the recent past is a template for what the market is going to look like in the future. This is rarely the case, especially following extreme moves. In March 2010, the market environment looked a lot different than March 2009. A year from now we could very well be saying the same. Prior to the current streak, the most recent streak on the list above occurred from August 2006 through July 2007. I remember July 2007 very well and can tell you that, like today, there were few concerns about anything. I recently wrote of the similarities between this year and 2007, which persist today.
Lastly, really enjoy the streak while it lasts because it won’t last forever. I know it’s impossible to do so in the moment, but try to appreciate how rare of an environment this has been for the market and that we are making history each and every day.
It has now been 73 years since DiMaggio set the consecutive hitting streak record. No one has really come close since. Will investors be looking back 73 years from now, talking about the 2012-2014 historic run and referring to this blog post? Probably not, but it’s fun to think about.
This writing is for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation regarding any securities transaction, or as an offer to provide advisory or other services by Pension Partners, LLC in any jurisdiction in which such offer, solicitation, purchase or sale would be unlawful under the securities laws of such jurisdiction. The information contained in this writing should not be construed as financial or investment advice on any subject matter. Pension Partners, LLC expressly disclaims all liability in respect to actions taken based on any or all of the information on this writing.
Charlie Bilello is the Director of Research at Pension Partners, LLC, an investment advisor that manages mutual funds and separate accounts. He is the co-author of two award-winning research papers on Intermarket Analysis. Mr. Bilello is responsible for strategy development, investment research and communicating the firm’s investment themes and portfolio positioning to clients. Prior to joining Pension Partners, he was the Managing Member of Momentum Global Advisors, an institutional investment research firm. Previously, Mr. Bilello held positions as an Equity and Hedge Fund Analyst at billion dollar alternative investment firms, giving him unique insights into portfolio construction and asset allocation.
Mr. Bilello holds a J.D. and M.B.A. in Finance and Accounting from Fordham University and a B.A. in Economics from Binghamton University. He is a Chartered Market Technician (CMT) and a Member of the Market Technicians Association. Mr. Bilello also holds the Certified Public Accountant (CPA) certificate.
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