Rare "slow drop, rapid rise"! In this US stock rebound: hitting all-time highs in just 11 days after only a 5%-10% decline

The US stock market is rewriting history. The S&P 500 index, after dropping less than 10% from its high, took only 11 days to return to a historical peak—a feat that has never occurred in nearly a century of market records.

What makes this rally extraordinary is that it has overturned the market adage "the stock market takes the elevator down, and the escalator up"—the prolonged decline since the January high was completely erased in just two weeks.

The force behind this rapid rebound comes from a resonance on both bullish and bearish sides: when the market is extremely tilted to the bearish side, any improvement in sentiment can spark a sharp rally.

At the same time, Wall Street analysts have continued to raise corporate earnings forecasts, providing fundamental support for the stock market.

Unprecedented: Fastest Rebound after a Shallow Correction

According to historical data tracked by investment research firm Bespoke Investment Group since 1928, this is the first time on record that the S&P 500 has recovered from a 5%-10% decline to hit a new all-time high within 11 days or less.

"This rally is truly unusual," said Paul Hickey, co-founder of Bespoke, "we've seen gains of similar magnitude before, but they usually don't occur so close to the market high. The market usually needs to fall deeper before displaying this kind of move."

This historical comparison reveals that V-shaped rebounds themselves are not rare, but what is rare are their trigger conditions. The fact that this one happened after such a limited drawback makes it unique in market history.

Position Reset: Extremely Bearish Set the Stage for the Rebound

Analysts have listed a number of factors explaining why this rally was so powerful, with position structure being the most direct one.

Wall Street analysts from Morgan Stanley and Vanda Research previously noted that retail investors did not aggressively buy the dip during this decline as they had in the past. At the same time, models from institutions like Deutsche Bank indicated that professional investors and systematic funds have started to bring their equity exposure back to neutral levels.

Late last week, Goldman Sachs analysts warned that CTA funds could be poised to buy tens of billions of dollars worth of equities under almost any foreseeable scenario.

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

Earnings Forecasts Raised Against the Trend, Providing Fundamental Support

Another explanation with a more fundamental investment perspective lies in the fact that Wall Street analysts continued to raise corporate earnings forecasts even when market sentiment was weak earlier this year.

Glenn Dorsey, head of client portfolio management at Clark Capital Management, pointed out that, judging from long-term charts, the S&P 500's price generally tracks closely with expected earnings. "But when the two lines diverge significantly, it often signals an attractive buying opportunity."

This year, there are more factors influencing markets. Panic-driven trading in the artificial intelligence sector had previously hammered software and professional services stocks, and concerns about the return on large-scale AI investments had long weighed on mega-cap cloud companies like Microsoft.

Additionally, Dorsey noted that investors have recently begun to accept the view that the US economy today is more resilient to surging oil prices compared to the past. Improvements in energy efficiency and a significant increase in domestic US production are likely to offset to some extent the shocks from rising global energy prices.