S&P 500 has rallied for over 90 days
tim kiladze
Globe and Mail Update
Posted on Tuesday, March 20, 2012 10:13AM EDT

Everyone knows the U.S. market has been doing well. The Nasdaq is above 3000 for the first time since the year 2000. But one stat is particularly eye-catching: the S&P 500 is on a big three-month rally, with no significant correction for 92 days.

To put that in context, since the index started to recover in March 2009, the S&P 500’s longest rally without a major pullback was 97 days, as calculated by Desjardins Securities. That makes this the second-biggest run since the financial crisis.

And to show just how little the S&P 500 has fallen during its ‘down days’ in this rally, its deepest ‘correction’ was only 1.2 per cent two weeks ago.

Over this three-month period, the TSX has lagged the S&P 500 by about 13 per cent. That isn’t particularly surprising given that year-to-date the TSX is up only 4 per cent, beating only Mexico and Spain, Desjardins pointed out. (For more on the TSX’s underperformance, check out the Globe’s coverage on Monday.)

The big U.S. rally has come with a corresponding bond selloff. Over the past nine days U.S. yields have jumped much higher, particularly the 10-years, the second longest run since 1980. “The last time this happened -- June 14, 2006, with the 10-year yield hitting 5.25 per cent -- the S&P 500 rose 19.3 per cent over the following 252 days,” noted Ed Sollbach of Desjardins Securities.

So are U.S. stock markets way too expensive now? That’s a personal decision. But keep in mind that the S&P 500’s dividend yield now sits at about 1.97 per cent -- or about 2.05 per cent if you price in Apple’s new dividend. The TSX’s yield is about 2.85 per cent.