The stock market has notched a remarkable recovery from its early-April lows, delivering healthy double-digit returns in the wake of mounting optimism that stimulus from the One Big Beautiful Bill Act and Fed interest rate cuts offset tariff headwinds.

Major market returns since April 8 lows:

  • S&P 500: 32.7%
  • Nasdaq: 46.7%
  • Dow Jones Industrial Average: 22.4%

The rally has lifted the major market averages, including the S&P 500 benchmark index, to all-time highs in September, frustrating many bears who argue that stock prices have become untethered to reality given the market’s valuation.

Concerns over the S&P 500’s p/e ratio are likely a major reason many investors have remained on the sidelines since April, missing the move. Ironically, that sidelined money may provide the energy for higher prices as, one by one, discouraged doubters cover short positions or buy to join the party.

Of course, there are no guarantees when it comes to investing. Still, one popular analyst, Carson Group’s Chief Market Strategist Ryan Detrick, crunched the data, and his take is that the stock market’s record-setting run may not be over.

The S&P 500 and Nasdaq Composite have notched impressive gains since April’s low.

Stock market rally thumbs nose at economic warning signs

Image source: TheStreet In April, common thinking was that enacting tariffs would fuel inflation and derail economic growth, sparking job losses and sending the U.S. economy into a tailspin.

  • CPI inflation is trending higher.
  • Unemployment is climbing.
  • Consumer confidence is weak.

That hasn’t happened, but there are warning signs flashing: While inflation remains manageable and significantly below the 8%-plus peak notched in June 2022, it’s begun rising again. The Consumer Price Index CPI inflation measure clocked in at 2.9% in August, far above the recent 2.3% low in April before most tariffs kicked in.

The August inflation reading was the highest since January 2025, when it was 3%. A breakout above 3% could lead to forward inflation expectations chugging higher—crimping the economy and potentially tossing cold water on hopes for more interest rate cuts in 2026.

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The Fed’s monetary policy is ruled by a dual mandate to encourage low inflation and unemployment. This mission is easier said than done, especially now, given that unemployment is also growing.

According to the Bureau of Labor Statistics, the unemployment rate was 4.3%, the highest since late 2021 when it was retreating because of Covid-stimulus-driven GDP growth. For perspective, the unemployment rate was 3.4% in April 2023.

Rising inflation and unemployment aren’t good, and consumers have taken note. The Conference Board’s Consumer Confidence report for August revealed that its Expectations Index fell 1.2 points to 74.8 last month, remaining below the threshold of 80 that historically signals a looming recession.

Rising risks, stretched valuations may not matter

The stock market typically struggles in September, but so far, it has performed remarkably well. According to the Stock Trader’s Almanac, September is historically the worst month for average S&P 500 returns since 1950, delivering an average loss of 0.7%.

The S&P 500 is up about 2% in September this year. If the stock market doesn’t roll over, gains would extend its winning streak to five consecutive months. 

In the past, winning streaks of that length preceded higher stock prices, according to Carson Group’s Ryan Detrick. In a post on X, Detrick wrote:

Want to make your favorite perma-bear mad? The S&P 500 is about to be up five months in a row. A year after 5 month win streaks? Higher 28 out of 30 times and up 12.6% on avg.

Five Month Win Streaks have previously preceded further stock market gains.

Carson Investment Research More intriguing? The win rate. Detrick noted 30 instances of 5-month winning streaks since 1950, and the market was higher one year later in 28 of them, an impressive 93% success rate.

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More Wall Street: Stock Trader’s Almanac’s Jeffrey Hirsch has similarly found encouraging data for future returns following a strong September.

“New all-time highs in September have historically been rather bullish,” wrote Hirsch in an email to subscribers. “Q4 performance has historically been solid but it also improved following five or more new all-time highs in September with only one loss in 8 years.”

According to Hirsch, the S&P 500’s average and median return in the fourth quarter following this setup were 5.21% and 5.01%, respectively.

One word of caution, though. Hirsch’s data shows that October was lower in five of the eight instances, resulting in a median October loss of 0.74%. That could mean we will see some selling emerge in the coming weeks.

Still, Hirsch doesn’t think any sell-off will be much to worry about.

“We still anticipate any pullback, or retreat to be relatively brief and shallow,” wrote Hirsch. “Afterwards the current bull market is likely to propel the market to more new all-time highs as yearend approaches.”

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