Many are declaring the bear over, but a new bull market is more a process than a single moment
Bank of America and Bespoke Investment Group recently announced the start of a new bull market after the S & P 500 closed up 20% from its October bear-market low. However, this is just a momentary touchstone as the beginning of a potential bull market is a process, not a moment, occurring as the weight of the evidence gradually shifts in favor of the optimists.
The conditions were set with a climactic-seeming washout into the October trough, just as inflation peaked, fear crested, and seasonal factors turned favorable. A fourth-quarter rally paused in mid-December only to rev up into January, when a series of rare momentum and breadth indicators were triggered and the most mistreated stocks of 2022 roared back to life.
While the advance last few months has been roundly heckled for its over-reliance on a half-dozen huge, expensive growth stocks, that never seemed from here a fatal weakness. And in any case, this month there has been some encouraging partial broadening of the strength, with the equal-weight S & P outperforming the standard index by a percentage point so far in June.
Despite all this, the economy has been resilient but is slowing in many areas, with a jump in weekly unemployment claims demanding notice. It’s tough to see how, even in a stable tape and mild-growth economy, Wall Street can entirely escape the “late-cycle” recession vigil.
FAQs:
What is a bull market?
A bull market is a financial term that describes upward trends in the stock market. This typically means an extended period where stocks rise in value, allowing investors to make money.
When does a bull market start?
A bull market starts after a bear market. The general rule is that a new bull market begins after stocks rise 20% from their low point.
Are we currently in a bull market?
Bank of America and Bespoke Investment Group recently announced the start of a new bull market after the S & P 500 closed up 20% from its October bear-market low. However, the beginning of a potential bull market is a process, not a moment, and occurring as the weight of the evidence gradually shifts in favor of the optimists.
What are some factors contributing to the current market conditions?
The conditions were set with a climactic-seeming washout into the October trough, just as inflation peaked, fear crested, and seasonal factors turned favorable. A fourth-quarter rally paused in mid-December only to rev up into January, when a series of rare momentum and breadth indicators were triggered and the most mistreated stocks of 2022 roared back to life.
What are some potential risks to the current market conditions?
Despite all the positive indicators, the economy has been resilient but is slowing in many areas, with a jump in weekly unemployment claims demanding notice. It’s tough to see how, even in a stable tape and mild-growth economy, Wall Street can entirely escape the “late-cycle” recession vigil.
The end of the bear market is being proclaimed by many, yet a fresh bull market is a gradual process rather than an isolated event.
Last week, Bank of America and Bespoke Investment Group declared a new bull market underway after the S&P 500 met the simplistic standard of closing up 20% from its October bear-market low. However, the beginning of a potential bull market is a process rather than a moment, with the weight of evidence gradually shifting in favor of the optimists. A new bull market doesn’t always mean a timely sprint to hefty gains. Bespoke Investment Group states that the forward returns once the S&P has posted the initial 20% rise are no better than average over the subsequent three months, but over a 12-month span, they are decidedly superior to a typical annual return. Despite investor optimism, there are still headwinds to overcoming, such as a slowing economy and the recent jump in weekly unemployment claims.