Posted by lplresearch
Wednesday, March 23, 2022
The bear market ended two years ago today and the subsequent bull market has clearly been an amazing ride. For some context, it was the fastest bull market to double ever, at just under 18 months.
Here’s where it ranks against the other bull markets that have doubled. You can see it is currently up 102%, making it the best bull market on its second birthday ever. 2009 was up 95%, coming in second.
At the recent peak in early January, the S&P 500 Index was up 114%, making it the seventh bull market to double. The annualized return of 53.4% shows just how explosive this move was off the lows and does imply some type of break could be warranted.
Here’s another way to look at this bull market as it starts year three. Previous strong bull markets saw modest gains and really spent much of the third year consolidating the previous big gains.
“As this bull market reaches the third year of life, investors need to remember that year three of bull markets tend to be a little tamer, with the larger gains happening in year one and two,” explained LPL Financial Chief Market Strategist Ryan Detrick. “In fact, out of the 11 bull markets since World War II, we found that three of them ended during year three, while the ones that didn’t end saw an average gain of only 5.2%.”
As shown in the LPL Chart of the Day, year three of bull markets have returned only 5.2% on average for the S&P 500, versus first year gains of 41.8% and second year gains of 12.8%, while three bull markets outright ended in year three.
We expect the bull market to continue, but some bumps in the road are normal. As the bull ages, year three could provide some of those bumps.
For more on the bull market turning two and what could happen next, please watch the latest LPL Market Signals podcast with Jeff Buchbinder and Ryan Detrick, as they break it all down.
IMPORTANT DISCLOSURES
This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change.
References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.
Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services. LPL Financial doesn’t provide research on individual equities. All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.
All index and market data from FactSet and MarketWatch.
This Research material was prepared by LPL Financial, LLC.
Securities and advisory services offered through LPL Financial (LPL), a registered investment advisor and broker-dealer (member FINRA/SIPC).
Insurance products are offered through LPL or its licensed affiliates. To the extent you are receiving investment advice from a separately registered independent investment advisor that is not an LPL affiliate, please note LPL makes no representation with respect to such entity.
- Not Insured by FDIC/NCUA or Any Other Government Agency
- Not Bank/Credit Union Guaranteed
- Not Bank/Credit Union Deposits or Obligations
- May Lose Value