Quick Bites | The Bull Market

After experiencing a 5.5% drawdown in early April, the S&P 500 has rallied back to close at a new all-time high. US stocks on Wall Street closed at new records after data showed inflation had fallen slightly to 3.4% in April, prompting market traders to increase their bets on US Federal Reserve (Fed) interest rate cuts later this year. 

The consumer price index data released by the US labour department on Wednesday 15 May was in line with expectations. It compared with March’s rate of 3.5% and ended a four-month streak in which inflation outstripped expectations. 

The US futures market reacted to the report by pricing in the possibility the Fed would lower interest rates twice this year (having previously priced in between one and two cuts). US stocks rose while government bond yields fell. The S&P 500 set its first record closing high since late March, leaving the index up 11.3% higher this year. The Nasdaq and the Dow Jones likewise set new records. 

Most commentators define bull markets as 20%+ rallies that were preceded by 20%+ declines. If we use that measure, we entered the new bull market in October 2022. 

Below is a look at historical bull and bear markets for the S&P 500 since 1928. What is notable is that the current bull market is already 581 days old. That is longer than the median bull market length of 522 days seen across the 26 bull markets before this one. 

On average, US bull markets have lasted 1,011 days and seen a rally of 114%. Compared to the average (instead of the median), this bull (with a gain of 48% over 581 days) is still relatively young.   

But as always, caution is warranted. Historical patterns are not infallible, and there are no guarantees that this bull market will conform to previous ones. 

Source: Bespoke Investment Group