Rare "Slow Decline, Fast Rally"! US Stocks Hit New Highs in Just 11 Days After a Drop of Only 5%-10%

US stocks are rewriting history. The S&P 500 returned to an all-time high in just 11 days after falling less than 10% from its peak—a scene that has never occurred in nearly a century of market records.

What makes this rally extraordinary is that it overturns the common market wisdom that "stocks descend by elevator but ascend by escalator." The prolonged decline starting from the January peak was completely erased in just two weeks.

The force driving this rapid rebound comes from a resonance on both the long and short sides: extremely bearish market positioning means any improvement in sentiment can trigger a sharp upward move.

At the same time, Wall Street analysts have continuously raised corporate earnings forecasts, providing fundamental support for the stock market.

Unprecedented: Fastest Rebound After a Shallow Correction

According to historical data traced back to 1928 by investment research firm Bespoke Investment Group, this is the first time the S&P 500 has recovered losses and reached a new all-time high within 11 days or less following a decline between 5% and 10%.

"This rebound is indeed extraordinary," said Paul Hickey, co-founder of Bespoke. "Rallies of similar magnitude have occurred before, but they typically do not happen so close to the market's peak. Markets usually need to fall deeper before such a pattern emerges."

This historical comparison reveals that while V-shaped rebounds themselves are not rare, the conditions triggering them are. Occurring against the backdrop of a very limited decline, this event stands alone in market history.

Position Reset: Extremely Bearish Stances Ignite Rebound Spark

Analysts have cited multiple factors explaining why this rebound has been unusually strong, with position structure being the most direct one.

Wall Street analysts at institutions including JPMorgan and Vanda Research previously pointed out that retail investors did not actively buy the dip during this decline as they typically do. Meanwhile, models from institutions like Deutsche Bank show that professional investors and systematic funds have begun adjusting their equity exposure back to neutral levels.

Later last week, Goldman Sachs analysts warned that CTA funds may be preparing to buy hundreds of billions of dollars worth of stocks across almost all foreseeable scenarios.

"When positions are extremely bearish, even a slight improvement in investor sentiment is enough to ignite a significant rally," said Anthony Saglimbene, Chief Market Strategist at Ameriprise, in a written comment sent to MarketWatch.

Earnings Forecasts Raised Against the Tide, Providing Fundamental Support

Another explanation with greater significance for investment fundamentals lies in the fact that Wall Street analysts continued to raise corporate earnings forecasts earlier this year despite subdued market sentiment.

Glenn Dorsey, Head of Client Portfolio Management at Clark Capital Management, noted that over the long term, the price trend of the S&P 500 usually aligns closely with expected earnings. "But when these two lines diverge significantly, it often signals an attractive buying opportunity."

Factors influencing the market this year extend beyond this. The "panic trading" in the artificial intelligence sector previously dealt heavy blows to software and professional services stocks, while concerns about returns on large-scale AI investments had continuously suppressed the share prices of "hyperscale" cloud providers like Microsoft.

Additionally, Dorsey stated that investors have recently begun gradually accepting the view that, compared to the past, the US economy now has a stronger capacity to withstand spikes in oil prices. Improvements in energy efficiency and a significant increase in domestic production are expected to buffer, to some extent, the impact of rising global energy prices.