That’s the current Z-score of the S&P 500’s 1-year return — right near its 5-year average.
Here’s the chart:
Let's break down what the chart shows:
The top panel plots the S&P 500 daily close as a black line, stretching from the early 1990s to now.
The bottom panel shows the 5-year Z-score of the S&P 500’s 1-year rate of change.
This metric standardizes annual return levels versus the trailing 5-year return distribution.
The Takeaway: Markets aren’t stretched — statistically, they’re right in the middle of the pack.
Despite the S&P 500 trading near all-time highs, the current 1-year return isn’t elevated relative to its recent history.
The Z-score reading of –0.2 tells us that returns are sitting almost perfectly in line with the 5-year average.
No excess.
No froth.
Just trend.
That’s statistically unusual at this stage of a rally.
In past cycles, strong runs like this typically pushed the Z-score up to +2 or higher — signaling overextension and setting the stage for mean reversion. Think 2010, 2019, or 2021.
But that’s not what we’re seeing today.
The wild swings in returns over the last couple years have faded — and now, the market’s long-term return looks normal again.
And from a trend perspective, there’s still space to run before the data gets stretched again.
It also reinforces what we’ve been seeing elsewhere: clean trends, broad participation, and a tape that isn’t flashing major excess.
This doesn’t mean the market can’t pull back. But it does mean that structurally, this isn’t a blowoff — and that’s a key difference.
How often do you see strength that isn’t stretched?
Grant Hawkridge | Chief Aussie Operator, All Star Charts
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