The Bull Market Just Turned 2 Years Old. Here's What History Says Happens Next.
Tuesday, Oct 22, 2024 3:25 am ET
2min read As the S&P 500's bull market celebrates its second anniversary, investors are eager to understand the potential longevity and strength of this market cycle. By examining historical data, we can gain insights into the average gains and duration of bull markets following recessions compared to those not following recessions. Additionally, we can analyze the current market conditions and factors contributing to the longevity and strength of the current bull market.
Historically, bull markets following recessions have tended to last longer and produce stronger gains than those not following recessions. According to Charles Schwab, the average life of a bull market following a recession is nearly twice as long (61 months) as one that doesn't follow a recession (33 months). Furthermore, the average return for the S&P 500 bull's first two years following a recession is 62.9%, compared to 40.5% following no recession. Looking at gains after the first three years, the average return for the S&P 500 bull's first three years following a recession is 66.8%, much stronger than the average following no recession (41.9%).
The current bull market began with the unemployment rate at 3.6%, the lowest in the history of new bull markets. This unique characteristic raises questions about the staying power of the current market cycle. However, it is essential to consider other factors contributing to the longevity and strength of bull markets, such as market valuations, earnings growth, and monetary policy.
In the current market, the five-year normalized P/E ratio was the most expensive in history when the bull market began. While earnings have recovered nicely, the fact that multiples have grown faster means there might not be as much juice left to squeeze out from multiple expansion. This puts the onus increasingly on earnings to drive further market gains.
Economic indicators, such as GDP growth and unemployment rates, can impact the duration of post-recession bull markets. Additionally, interest rates and monetary policy play a crucial role in extending or shortening bull market lifespans following recessions. Sector-specific performances and market sentiment also contribute to the longevity of bull markets after recessions.
In conclusion, the S&P 500's bull market has reached a significant milestone, marking two years of gains. By examining historical data, we can see that bull markets following recessions tend to last longer and produce stronger gains than those not following recessions. However, the unique characteristics of the current market cycle, such as its low unemployment rate at the start, raise questions about its longevity. As investors look to the future, they should consider the factors contributing to the longevity and strength of bull markets, including market valuations, earnings growth, economic indicators, interest rates, and sector-specific performances. By staying informed and understanding the historical context, investors can make more informed decisions about their portfolios and navigate the market's ups and downs with confidence.
Historically, bull markets following recessions have tended to last longer and produce stronger gains than those not following recessions. According to Charles Schwab, the average life of a bull market following a recession is nearly twice as long (61 months) as one that doesn't follow a recession (33 months). Furthermore, the average return for the S&P 500 bull's first two years following a recession is 62.9%, compared to 40.5% following no recession. Looking at gains after the first three years, the average return for the S&P 500 bull's first three years following a recession is 66.8%, much stronger than the average following no recession (41.9%).
The current bull market began with the unemployment rate at 3.6%, the lowest in the history of new bull markets. This unique characteristic raises questions about the staying power of the current market cycle. However, it is essential to consider other factors contributing to the longevity and strength of bull markets, such as market valuations, earnings growth, and monetary policy.
In the current market, the five-year normalized P/E ratio was the most expensive in history when the bull market began. While earnings have recovered nicely, the fact that multiples have grown faster means there might not be as much juice left to squeeze out from multiple expansion. This puts the onus increasingly on earnings to drive further market gains.
Economic indicators, such as GDP growth and unemployment rates, can impact the duration of post-recession bull markets. Additionally, interest rates and monetary policy play a crucial role in extending or shortening bull market lifespans following recessions. Sector-specific performances and market sentiment also contribute to the longevity of bull markets after recessions.
In conclusion, the S&P 500's bull market has reached a significant milestone, marking two years of gains. By examining historical data, we can see that bull markets following recessions tend to last longer and produce stronger gains than those not following recessions. However, the unique characteristics of the current market cycle, such as its low unemployment rate at the start, raise questions about its longevity. As investors look to the future, they should consider the factors contributing to the longevity and strength of bull markets, including market valuations, earnings growth, economic indicators, interest rates, and sector-specific performances. By staying informed and understanding the historical context, investors can make more informed decisions about their portfolios and navigate the market's ups and downs with confidence.
Disclaimer: the above is a summary showing certain market information. AInvest is not responsible for any data errors, omissions or other information that may be displayed incorrectly as the data is derived from a third party source. Communications displaying market prices, data and other information available in this post are meant for informational purposes only and are not intended as an offer or solicitation for the purchase or sale of any security. Please do your own research when investing. All investments involve risk and the past performance of a security, or financial product does not guarantee future results or returns. Keep in mind that while diversification may help spread risk, it does not assure a profit, or protect against loss in a down market.
_c903a0241747419104650.jpg)
