Even a New Bull Market Hasn't Stopped the Fearmongers

The bear market has been dead for months. It was clear to anyone paying attention. But now it's official...

The S&P 500 Index has now risen more than 20% above last year's low. It's an arbitrary level – but the media has caught on to the story. Many folks are calling this the official start of a new bull market.

That shift in tone hasn't silenced the fearmongers, though. They've found a new boogeyman to scare you out of the market.

At a glance, it's a powerful narrative... But if you dig into the data, this frightening idea isn't what it seems.

Instead, history shows that stocks tend to do darn well after this boogeyman shows its face. We can expect double-digit gains from here. And that makes this another media scare that you can safely ignore.

Let me explain...

Just five stocks are responsible for all the stock market gains this year.

You might see this phrased in different ways. But that's the gist of what folks are worried about.

The implication is clear... Only a few companies are doing well. The rest of the market is struggling. That can't last forever. And the problem must solve itself – when those big winners inevitably crash back down to Earth.

The chart below shows this in action. It's the average return of the five largest stocks versus the overall S&P 500 since the start of the year. Take a look...

The five largest stocks are up an average of 75% so far in 2023. Meanwhile, the overall market is up about 15%.

I get it if this worries you. Seeing this, it's normal to assume we're in the middle of a major sucker's rally.

But the fearmongers are missing one thing: History shows that this is nothing to worry about...

That's according to Brian Belski. He's the chief investment strategist for BMO Capital Markets, the investment-banking arm of the Bank of Montreal.

Belski has more than three decades of market experience under his belt. And in a recent research piece, he came at the fearmongers head on...

Price action in mega-cap stocks dominated market headlines in recent months... However, our work shows that once relative performance of these megacaps has subsided or winning streaks have ended, the broader market has historically held up just fine.

Specifically, Belski looked at five-month relative returns of the five largest companies and the overall S&P 500. The current outperformance is the second highest since 1990. And we've seen similar setups 10 other times over the same period.

What's interesting is that stocks don't have a history of crashing in this environment. In fact, the market was up a year later 70% of the time. And the average gain a year later was 10.7%.

That doesn't indicate that a massive boom is about to happen. But it does buck the prevailing narrative about the market being on shaky ground.

Even though the bear market is over, the pain of last year is far from gone. Everyone is still a bit shellshocked... And that makes it easy to fall prey to all kinds of scary stories about the market.

Don't make that mistake. The trend is up. Stocks are performing well. And you want to put money to work right now to take advantage of it.

Good investing,

Brett Eversole

Further Reading

"The recent setup tells us that the bear market is likely done for good," Brett writes. We're seeing a big surge in growth stocks like tech. It's a strong rally. Not only that, but one key tech index just made the kind of move that only happens when a prolonged bear market ends... Learn more here.

When prices start rising in the markets, they tend to keep rising. We have one of those opportunities right now. The S&P 500 broke a rare streak recently – and it means double-digit gains are likely from here... Read more here.

Market Notes



Moody's (MCO)... credit-ratings firm
S&P Global (SPGI)... financial information and analytics
Apple (AAPL)... iconic tech brand
Microsoft (MSFT)... tech giant
Meta Platforms (META)... social media giant
Taiwan Semiconductor Manufacturing (TSM)... semiconductors
Oracle (ORCL)... database and cloud services
VMware (VMW)... cloud computing
Adobe (ADBE)... cloud services
Shopify (SHOP)... e-commerce platform
Uber Technologies (UBER)... ride-hailing giant
Netflix (NFLX)... video streaming
Walmart (WMT)... "World Dominator" of discount retail
Toyota Motor (TM)... automaker                    
Lennar (LEN)... homebuilder
Delta Air Lines (DAL)... airline
Boeing (BA)... "offense" contractor


First Majestic Silver (AG)... silver