What typically follows an April/May stock market surge

Key points:

• After a selloff in March, the S&P 500 advanced over 16% during the combined months of April and May
• This kind of sharp rally tends to make investors nervous, thinking that the market is "due for a pullback"
• However, the history of similar moves suggests the potential for further upside in the months ahead

When the S&P gains 10% or more during April and May

The S&P 500 gained a combined 16.1% during April and May of this year. How common is this? Not very. The green up arrows in the chart below highlight each time since the late 1920s when the S&P 500 gained +10% or more in April and May combined. The red down arrows mark one year after the previous up green arrow. Before this year, there were only 8 previous instances.

The obvious question is, "How did the market do after April/May gained 10% or more? The table below shows the results for each of the previous instances. The green box shows the cumulative price return for the S&P 500 Index over the following 12 months. The red box shows the largest interim open loss experienced along the way.