Lately, we’ve been highlighting a number of crazy streaks involving the steadiness of equities in the last several months, but have you seen a chart of the two-year yield lately?  While the yield had its share of ups and downs during the first three quarters of 2017, ever since then it has been on auto-pilot to the upside, rising from 1.4% up to over 2%.  Looking at this chart, there has been a consistent gap between the current yield and its 50-day moving average to the point where the yield has finished each of the last 98 trading days at least one standard deviation above that level.

Look at the chart above again, because it’s unlikely you will ever see anything like it in a long time, at least if the last 40+ years is any indication.  That’s because there has never been a time in the two-year Treasury’s history where it has been more than one-standard deviation above its 50-DMA for this long.  Conversely, there has never been a streak where the yield on the two-year was this far below its 50-DMA for this long either.

The chart below shows historical streaks (in trading days) where the two-year US Treasury yield was more than one standard deviation above its 50-DMA or more than one standard deviation below it.  In terms of closes above that level, the longest streak prior to the current one was back in 1994 when there were actually two back to back streaks of 70+ trading days.  If you don’t remember 1994, it was another period where short-term interest rates steadily rose from just under 4% to just under 8% following a long period of dormancy.  That increase in rates culminated with the bankruptcy of Orange County, California in December 1994.  On the downside, the longest streak where the yield on the two-year closed more than one standard deviation below its 50-DMA ended in January 1985 during a period where the yield declined from close to 12% to just under 10%.

A number of people have asked, so we wanted to provide a quick summary of how the S&P 500 has historically performed following State of the Union speeches by US Presidents since 2001.  Given that the speeches take different tones depending on the President and where each one was at in their term, not to mention the state of the economy, it’s hard to say that this speech has any real direct impact on the overall market.  Therefore, we would take the performance numbers with a grain of salt.

With that caveat, the one-week period stands out for its overall weakness, while the one-month period has been relatively strong.  In the week that has followed SOTU speeches, the S&P 500 saw an average decline of 1.0% with gains in just 6 of the last 17 years.  Regardless of who the President was, the S&P 500 has been down more often than it has been up.  While one-week returns have generally been negative, one-month returns have been much more positive.  Since 2001, the S&P 500 has seen an average gain of 0.74% (median: 1.16%) in the month after a SOTU speech with positive returns in all but four years.  Under President Obama, the gains were even stronger with the S&P 500 having a median gain of 3.16% and only one year where it was down a month later.  Thanks Obama!

With yesterday’s 0.67% decline for the S&P 500, the index ended a streak of 99 trading days without a decline of just 0.60% or more.  As shown in the chart below, that’s the longest streak on record!  If you needed further evidence that this market has been unbelievable lately, there you have it.

Another streak that’s just as — if not more — unbelievable is that the S&P 500 has now gone 310 trading days without experiencing back-to-back declines of 0.50%+.  Think about that — it has been 310 trading days dating back more than a year to November 2nd, 2016 (just before the election) since we had two days in a row of declines of just half a percent.

As shown below, the current streak of 310 trading days — which may actually be broken today — is double the length of the 2nd longest streak without back-to-back declines of 0.50%+.

We’ve been saying it for the last few weeks now, but we’ll say it again — when the market does finally experience a pullback, it’s going to feel exponentially more painful for investors because of the simple fact that we haven’t experienced any kind of meaningful pullback in so long.  And when emotions run higher than normal, it makes investors more eager to push the sell button.  This in turn can cause even bigger declines, and the feedback loop begins.