The S&P is not a 6-month CD

  • Markets
  • Michael Gayed

This may come as a surprise to new investors, but the S&P 500 is not a risk-free certificate of deposit (CD). For more than three years, though, it has been behaving as one. Had you purchased the S&P 500 (SPY) at the end of any week since August 2011 and held for six months, you would have ended up with a positive return 100% of the time.


For 179 consecutive weeks, this has been true, marking the second longest stretch in history. Only the mid-to-late 1990’s (1994-1998) had a longer streak of positive 6-month returns.


What does this mean for investors going forward?

This has been one of the greatest periods for buy-and-hold investors in history. As a by-product, many investors have developed unreasonable expectations for their equity holdings – that they have no risk. These investors are likely to be disappointed and with S&P 500 up only up 1% over the past six months, this disappointment may come sooner than most expect.

Historically, the odds of a positive 6-month return in equities is only 67%. Thus, in one out of every three 6-month periods an investment in the S&P 500  would have lost money. Using equities as a substitute for a savings account or  short-term certificate of deposit – money you need available in within the next year – has never been a wise idea. The recent past doesn’t change that fact even though the outcome would have been favorable in hindsight.

On a broader note, the period of nearly unrelenting advance in U.S. equities has not been lost on investors. We now live in a world where everyone wants higher beta and correlation to the S&P 500 because that is “what has worked.” This is the polar opposite sentiment to March 2009 when everyone wanted low correlation and beta to stocks.

Prudent investors today will be positioning for the future, not the recent past. For if trees don’t grow to the sky, the next few years will look markedly different. If now is not the time to prepare for that eventuality, when is?

This writing is for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation regarding any securities transaction, or as an offer to provide advisory or other services by Pension Partners, LLC in any jurisdiction in which such offer, solicitation, purchase or sale would be unlawful under the securities laws of such jurisdiction. The information contained in this writing should not be construed as financial or investment advice on any subject matter. Pension Partners, LLC expressly disclaims all liability in respect to actions taken based on any or all of the information on this writing.



Charlie Bilello is the Director of Research at Pension Partners, LLC, an investment advisor that manages mutual funds and separate accounts.  He is the co-author of three award-winning research papers on market anomalies and investing. Mr. Bilello is responsible for strategy development, investment research and communicating the firm’s investment themes and portfolio positioning to clients. Prior to joining Pension Partners, he was the Managing Member of Momentum Global Advisors previously held positions as an Equity and Hedge Fund Analyst at billion dollar alternative investment firms.

Mr. Bilello holds a J.D. and M.B.A. in Finance and Accounting from Fordham University and a B.A. in Economics from Binghamton University. He is a Chartered Market Technician (CMT) and a Member of the Market Technicians Association. Mr. Bilello also holds the Certified Public Accountant (CPA) certificate.

You can follow Charlie on twitter here.


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