Stocks have been climbing the Wall of Worry for two years…

The 2022 bear market ended in October of that year. But ever since then, investors have been hearing that the new boom can’t last.

First, we heard that the “Magnificent Seven” stocks were the only thing keeping the rally going… then, that the AI bubble would soon burst.

And all along the way, we’ve seen fears about a slowing economy and the risk of geopolitical conflict.

Stocks have marched higher despite it all. And now, we’re seeing another sign that this boom is healthier than most folks realize.

Stocks are hitting new all-time highs – and so is a broader way to measure the market. According to history, that means this rally can last. And our expected upside is even higher than normal…

If you want to analyze the health of the market, it’s not enough to simply look at the S&P 500. At certain times, the overall market can rise in spite of problems, led by a handful of heavy hitters.

One thing we want to see is a broad rally, where lots of stocks are rising… not just the biggest ones that make up the bulk of the index weight.

That’s why the S&P 500 Equal Weight Index is so useful. This index doesn’t weight stocks by market cap. Instead, it holds an equal amount of each company, regardless of size.

If the equal-weight index is falling while the S&P 500 rises, that’s an unhealthy sign. But that’s not happening today. Both indexes hit 52-week highs last week. Take a look…

The S&P 500 has been leading the charge since the 2022 bottom… But the equal-weight index is rising, too. And again, both indexes are hitting new highs right now.

History shows that new 52-week highs are a great sign – even on their own. New highs tend to lead to outperformance, thanks to the upward momentum.

Here’s how the S&P 500 has performed since 1990 after hitting new 52-week highs…

It might feel wrong to buy stocks after they hit a new high… But the math proves it’s the right decision.

Stocks rose 5.1% in six months and 9.2% in a year after those setups. That’s better than a typical “buy and hold” strategy in both cases.

But if you buy at times like today – when the equal-weight index confirms the breakout – you can do even better.

Here’s what happened when the S&P 500 and the equal-weight index hit new 52-week highs together…

In these cases, the S&P 500’s six-month return is slightly lower than before. But the one-year return is more than one percentage point higher. Plus, the one-year win rate increases from 85% to 92%.

Most investors would brush this off as overly optimistic. Stocks continue to climb the Wall of Worry, after all. But history shows that you shouldn’t buy into those fears.

The market is hitting new highs. The equal-weight index is, too. That means the rally is healthy… And we can expect more gains in the months ahead.

Good investing,

Brett Eversole

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Source: Daily Wealth