- Michael Allison, CFA
- 2 days ago
- 2 min read
By Michael Allison, CFA
When the Rocket Launches From the Rooftop
This week’s Chart shows the S&P 500’s run from March 27 through May 8, a 16.2% gain in just six weeks, making it the 11th-biggest six-week rally going back to 1950. Rarefied air to say the least.
But the thing that makes this rally genuinely unusual is something I thought was worth discussing. Every other rally on that list, every single one, started from a market that was either bombed out, mid-crash, or with an economy crawling out of recession. 2009. 1982. 1974. 2020. Same setup, every time: panic, capitulation, violent mean-reversion bounce.
Not this one. This rocket launched from the rooftop, or at least close to it. The S&P was not very far below all-time highs when it took off.
So what happened?
I think a few forces converged, and they all served to buoy the market.
First, earnings. Q1 reporting was simply too good to fade. Strong revenue growth and operating leverage, especially in AI-adjacent names, set the stage for higher earnings expectation for the balance of 2026. Breadth was also wider than the headlines suggested.
Second, policy. Despite Kevin Warsh emerging as the next Fed Chair, it appears likely that we could see a bit of a stalemate at the Fed, and we may see them become less active. With rates leaking higher, it appears the equity markets are willing to believe that the bond market, not the Fed, is going to do the hard work of getting inflation down.
Third, tail risks faded. Iran stopped escalating. China posturing softened ahead of the state visit. Risks didn’t disappear; they just stopped getting worse.
Layer on top: a generation of investors trained to buy every dip and chase every rip. The same FOMO mechanic that powered the late-90s melt-up, except this time it’s running over an economy that isn’t even pretending to be in recession.
So what comes next?
Here’s where I’d urge some sober reflection.
The forward-return columns in this week’s Chart show 16% on average over six months, 30% over a year, 79% over five years. But those averages are flattered by the recovery rallies they’re built on.
When you bounce 17% off a generational low, the next five years are likely to look pretty great. When you run up 16% from already-elevated levels, the path forward is murkier. Valuations matter. Positioning matters. And the starting point matters most of all.
I would just say that the best six-week stretch you’ll ever live through is almost certainly the one that makes you forget what risk feels like.
Don’t forget what risk feels like.
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