The new bull market is here...
The trend has been up for most of the year. And as time has gone on, we've seen more and more reasons to expect prices to keep rising.
As I explained last week, the S&P 500 Index has risen more than 20% above last year's low. That's the typical threshold for a new bull market. And history shows it's worth paying attention to this change today.
That's because stocks almost always rally after a move like this happens. As I'll show, the typical gain a year later is an impressive 16%... And if this pattern plays out again, stocks will hit new highs within a year.
Let me explain...
It might seem arbitrary to call a 20% rise from a market bottom a new bull market. But finding the moment when a bear market changes into a bull market isn't a perfect science.
That's why this is the popular measure. Most folks think the same way about the opposite transition, too. We call a 20% drop a bear market – even if stocks have already suffered most of the damage by then.
The important point is, a 20% rise from the bottom means the trend is in our favor. Longtime readers know that sticking with the trend is crucial to successful investing. And right now, the trend is up. Take a look...
The S&P 500 only needs to rise another 10% to hit a new all-time high. And we have good reason to expect it to do so over the next year.
That's because stocks tend to keep soaring after officially entering a new bull market.
To see it, I looked at each time this happened going back to 1950... specifically, times when stocks dropped 20%-plus and then rose 20% from the prior low.
These moves don't happen often – mostly because bear markets are rare. We've only had 13 other instances in the past 70-plus years. But when they show up, big gains follow. Take a look...
It's hard to beat the boring old stock market for growing your wealth long term. The S&P 500 has returned 7.8% annually since 1950. But you can do much better if you buy in moments like we're in today...
Similar extremes have led to 9.1% gains in six months... and impressive 16.4% gains over the following year. If we see these kinds of gains over the next year, stocks will be at new highs. That's a feat almost no one would have thought possible at the start of 2023.
Plus, digging deeper, in 11 of the 13 cases, the bear market low had already happened. The only times it hadn't were the bear market from 2000 to 2002, and the financial crisis. And regardless, stocks were higher 92% of the time a year later.
That means stocks are very unlikely to backslide to new lows. The rally has confirmed the trend is with us.
It can't get simpler than this... The new bull market is here. New highs are on the way. And that means you want to own stocks.
Good investing,
Brett Eversole
Further Reading
U.S. stocks just staged a significant breakout – one that ended a rare losing streak. The trend has turned higher. It's another signal that shows more gains are likely over the next year. And best of all, it has a perfect track record... Learn more here.
"The bear market is likely done for good," Brett writes. Last year's decline hit growth stocks worst of all. Now, though, innovative tech leaders are outperforming again. And they just hit an important milestone that suggests the stock boom is just beginning... Read more here.
HIGHS AND LOWS
NEW HIGHS OF NOTE LAST WEEK
Apple (AAPL)... iconic tech brand
Meta Platforms (META)... social media giant
Dell Technologies (DELL)... laptops and PCs
Palo Alto Networks (PANW)... cybersecurity
Eli Lilly (LLY)... pharmaceuticals
McKesson (MCK)... health care giant
Cardinal Health (CAH)... prescription drugs
McCormick (MKC)... spices
Shake Shack (SHAK)... "addictive" fast food
MasTec (MTZ)... infrastructure and engineering
Martin Marietta Materials (MLM)... building materials
Vulcan Materials (VMC)... crushed stone and sand
Lennar (LEN)... homebuilder
D.R. Horton (DHI)... homebuilder
PulteGroup (PHM)... homebuilder
Zillow (Z)... online real estate
NEW LOWS OF NOTE LAST WEEK
Newell Brands (NWL)... consumer goods
UGI (UGI)... utilities
First Majestic Silver (AG)... silver
