This Bull Market is Just Getting Started…
Our long national nightmare is over.
The S&P 500 rallied to new all-time highs yesterday. It was the first intraday high recorded by the S&P since the January melt-up rally. After more than six months of choppy action, the stock market looks primed to push into uncharted territory.
That’s a long time to wait for a new high in the context of a secular bull market. But believe it or not, history says the breakout should be worth the wait.
“Since 1927, the S&P 500 has endured 17 other prolonged stretches without records,” Bloomberg notes. “After the drought ended, all but one saw stocks go higher over the next 12 months. On average, the index rose 13 percent, compared with 7.7 percent over any one-year period.”
Coincidentally, some investors are celebrating another market milestone today.
Today, the financial media is going to bombard you with news about how the current bull market is now the longest lasting rally in modern history, topping the 90s expansion that lasted almost a decade.
But that’s not how I see it.
If you dig below the sensational headlines, you’ll find that stocks have not sprinted higher in a straight line for nine straight years. In fact, stocks have endured multiple pullbacks and corrections since 2009, including a drop of more than 19% in the S&P 500 during the summer of 2011 (which apparently doesn’t count as an official correction since it missed dipping 20% by the skin of its teeth).
Of course, that wasn’t the last selloff we’ve witnessed since the financial crisis. Just turn back the clock to 2015 to find more market carnage. Prior to breaking out to new highs in late 2016, the S&P 500 endured a choppy, two-year “stealth bear” market that featured major, corrective selloffs in speculative names such as biotech and small-cap stocks. The major averages were also hit with double-digit corrections, culminating with a capitulation move to new 52-week lows in early 2016.
If that’s not enough turmoil, we also endured a quick double-digit correction just this year following the January melt-up rally. That should put to rest any idea that the market has gone nowhere but straight up since stocks bottomed in March 2009.
Furthermore, it’s important to measure the beginning of bull markets from where the averages first break out to new all-time high. That didn’t happen until 2013 for the S&P. There weren’t many bulls to be found prior to the 2013 rally. In fact, most investors remained on the lookout for a double-dip recession between 2009-2012. The financial crisis had shaken our confidence and we weren’t ready to embrace the new bull…
As you can see, the current secular bull market isn’t as long in the tooth as many would like you to think. Plus, we’re adding new bricks to the wall of worry almost every single day.
Case in point: political scandals are creeping back into market headlines as we fight toward new highs this week.
Two big stories hit last night as a jury found former Trump campaign chair Paul Manafort guilty of tax fraud. Meanwhile, Trump’s former personal attorney Michael Cohen admitted to campaign finance violations, claiming he was following Trump’s orders.
Drudge perfectly captured the moment:
The one-two punch of bad news for the president hit futures hard. They’ve recovered some of their losses this morning. But we still expect to see stocks open in the red.
It’s fitting we’re seeing some resistance here right as the S&P is shooting for new closing highs. There will always be distractions like these that attempt to throw us off our game…