A bull market anniversary worth noting and seeking perspective on, in this week’s Fastest 4 Minutes in Finance.
October 12, 2022: The Bear Market Low That Started the Current Bull Market
Next week, the current bull market turns 4 years old. It was October 12, 2022 that was the lowest point of the 2022 bear market.
What Is a Bear Market? What Is a Bull Market?
Just for clarity, a bear market is defined as when a major stock index drops 20% or more from its peak. A bull market is less clearly defined, but generally, is a period of time when stock indexes rise by at least 20% above those lows in a relatively short amount of time.
S&P 500 Up 116% and NASDAQ Up 155% Since the 2022 Market Low
Since that low point on October 12th, 2022, the S&P 500 Index has more than doubled, up 116%. The tech-heavy NASDAQ is up even more at 155%.
Inflation, Interest Rates, Oil Prices, and Elections: Worry Headlines vs. Stock Market Returns
I can’t count the number of times I read headlines about inflation, interest rates, global conflict in Iran, oil prices, bond yields, or elections, that were described as reasons to worry about the stock market. Yet, here we are. 4 years, and a stock market that has doubled in value. Of course, at some point, the bull market will end, right? The market doesn’t go straight up for long.
How Long Do Bull Markets Last? Average Bull Market Length Since 1949
Actually, it can. According to Yahoo Finance, the average length of a bull market since 1949 is about 5 1/2 years. And of the 8 bull markets that lasted at least three years, only 2 of them failed to make it through five years. Both of those were more than 50 years ago.
Can a Fast-Rising Bull Market Keep Going? S&P 500 Bull Market History from the 1980s to 2009
But, what about bull markets that surge up so quickly, as this one has? Surely, doubling in value in 4 years means it can’t go much higher, right? Looking at the S&P 500 index, a 116% gain in 4 years is above the bull market average, but it’s not unprecedented. The bull market of the mid-1980’s lasted 5 years, and the index gained 229%. Coming out of the Great Financial Crisis in 2009, the index roared upward for 11 years without a 20% correction, until the COVID pandemic stopped it. But not before delivering a 400% gain.
Stock Market Fundamentals: Why This Bull Market May Have More Room to Run
While it is helpful to gain perspective from stock market history, every bull market doesn’t follow the same track, and what matters more are the fundamental reasons that are driving the bull market. Those fundamentals do suggest this bull market may have more room to run.
S&P 500 Earnings Growth Estimates: 32% to 35% Full-Year Growth
As we mentioned last week, full-year earnings growth for the companies that make up the S&P 500 is estimated to land between 32% and 35%. That is four to five times the long term average.
AI Hyperscalers and Semiconductor Companies: The Technology Disruption Driving Earnings Growth
Also, as we have mentioned before, we are in the midst of a technology disruption that is poised to reshape our way of life. That doesn’t come around often. In fact, AI hyperscalers and semi-conductor companies are expected to account for 50% to 75% of that earnings growth.
Your Investment Strategy: Time Horizon, Diversification, and Staying Invested
But, at the end of the day, what matters the most is you and YOUR economy. You can’t afford to let the bad news drive your investment decisions. You also can’t invest like the market is never going down. Your plan and your time horizon should dictate your investment strategy. The longer you can stay invested the more you should lean into the stock market. But, if you need to sell or use your money in the near-term, diversification matters even more.
Securities are offered through LPL Financial, Member FINRA/SIPC. GenWealth Financial Advisors is an other business name of Independent Advisor Alliance, LLC. All investment advice is offered through Independent Advisor Alliance, LLC, a registered investment adviser. Independent Advisor Alliance, LLC is a separate entity from LPL Financial.
Past performance is not indicative of future results. All investing involves risk, and no strategy can assure
success. All information is general information only and should not be used as specific investment advice.
