Is This The Most Bullish Signal Wall Street Has Ever Flashed?

In April, we witnessed something remarkable. The S&P 500 had one of its sharpest two-day drops in the last three quarters of a century, only to turn around and post its largest single-day point gain in history.

On a single trading day, all three major indexes the Dow, S&P 500, and Nasdaq booked their biggest-ever nominal advances. For context, that’s not just unusual but is statistically anomalous.

This kind of volatility doesn’t happen often, and when it does, it tends to precede something big. Historically, wild market swings have signaled turning points, and often major ones, for long-term investors. And one of those rare patterns just reappeared.

Key Points

• April’s extreme market swings, some of the biggest in 75 years, have historically marked bullish turning points.

• Sky-high valuations, rising yields, and a U.S. credit downgrade raise red flags but they’ve also set the stage for major rallies in the past.

• Similar past surges led to gains 97 out of 98 times, with average five-year returns of 140%. 

What Triggered the Turbulence?

Let’s rewind the tape. April’s market whiplash wasn’t random. It came on the heels of several headline-grabbing catalysts, the most potent of which was a surprise move from President Donald Trump, unveiling a 10% blanket global tariff.

But just a week later, President Trump announced a 90-day pause on those tariffs, except for China. That announcement is what triggered the record-setting point rallies.

Then, in mid-May, the U.S. and China unexpectedly agreed to roll back many of their mutual tariffs for 90 days. The relief was palpable.

But if you think the tariff saga is over, think again. The Trump administration has opted for a piecemeal approach, country by country, meaning uncertainty will continue to hang over global trade policy and investor sentiment.

Tariffs weren’t the only issue.  Layer onto that rising Treasury yields, causing concern about inflation and borrowing costs, and Moody’s recent downgrade of the U.S. credit rating from AAA to AA1, and you’ve got a market that’s been walking a tightrope.

And Yet… Stocks Are Charging Higher

Despite the swirl of headwinds, the Dow, S&P, and Nasdaq have all rebounded significantly from their recent lows.

The Nasdaq briefly dipped into bear market territory in April, its first time since 2022, but has since clawed back nearly 1,000 points. The Dow and S&P 500 have both exited correction territory.

Here’s where it gets fascinating. The S&P 500 just posted a near 20% rally between over the past month and change. According to one market strategist at Creative Planning, that type of surge has only occurred 14 other times since 1950.

Examining 98 future return intervals from three months to five years following similar rallies, the S&P 500 was higher 97 out of 98 times. The lone exception? A short-term drop in late 2008 amid the worst of the Great Recession.

Most striking of all, the average five-year gain after such rallies was 140%, more than double the typical five-year return of about 61%.

History Favors the Patient

No pattern is perfect, and no signal is foolproof. But there’s no denying that markets move in cycles and those cycles overwhelmingly favor bulls over time.

Volatility and panic create windows of opportunity for disciplined investors. History suggests that outsized gains often come when sentiment is darkest, valuations are stretched, and headlines are grim.

The market’s recent behavior, far from being a warning sign, may actually be one of the most bullish signals in years. But let the market prove the bullish tailwinds will manifest and break through resistance before plunging in.