On March 23, this bull market will celebrate its second birthday, maybe, points out chief investment strategist Sam Stovall, in CFRA Research's flagship newsletter, The Outlook.
Should the S&P 500 close above its January 3, 2022, all-time high (4463.12) before recording a 20%+ decline, the birthday will be official; if not, its demise will be back dated.
In the past 12 months, the market (and economy) have endured many upending experiences, including the continuation of the Covid-19 pandemic, Russia’s invasion of Ukraine, the jump in WTI oil prices and its contribution to the headline CPI’s Y/Y surge, a 10-year yield above 2%, and the Fed’s start of a new rate tightening cycle that could deliver seven increases by year end.
Despite these headwinds, the S&P 500 has risen 12.8% in this second year (through March 17), accompanied by positive returns for all sizes and styles in the S&P 1500, along with 10 of its 11 sectors and 71% of its 149 sub-industries. Sector leaders include energy, real estate, and health care, while communications services was the only decliner.
What should investors expect in year three (if there is one)? On average, the 13 bull markets since WWII have lasted nearly five years. What’s more, the S&P 500 rose an average 16.3% during each year of existence.
Yet, like every baseball player, bull markets go through hitting slumps, and the third year seems to be when most do, since the average price gain was only 5.2% and witnessed the demise of three bull markets.
The only consolation is that the third year is also the least volatile, recording an average 31 trading days in which the S&P 500 rose or fell by 1% or more, versus an average of 46 for all years. Though volatility and uncertainty will prevail in the near term, CFRA still thinks this bull market will survive and recover recent losses before year end.
Representative stocks from the top S&P 1500 sub-industries during the second year of this bull market: CONSOL Energy (CEIX), Diamondback Energy (FANG), US Steel (X), Helmerich & Payne (HP), Exxon Mobil (XOM), Freeport- McMoRan (FCX), Schlumberger Ltd. (SLB), and Alcoa Corp. (AA).