Happy bull market anniversary! The bull just turned three years old. Since bottoming on Oct. 12, 2022, when the S & P 500 closed 25.4% lower into a bear market following the start of the Federal Reserve’s rate hiking campaign, the index has climbed a wall of worry back to all-time highs. Passing this milestone typically bodes well for the sustainability of the advance, history shows. “Since WWII, the eight bull markets that celebrated their third year lasted a total of nearly 6.5 years, gaining an average of 213%,” Sam Stovall, chief investment strategist at CFRA Research, wrote on Sunday. “This bull market rose 89% through its recent peak on October 8, so from a duration and magnitude perspective, this bull likely has much further to run.” .SPX 5Y mountain S & P 500, over five years According to a CFRA review of performance data going back to 1947, bull markets typically average a 12.7% advance in their fourth year. The best fourth-year advance came during the 1982-1987 bull market, when the S & P 500 surged 29.7%. The worst was during the 1949-1956 rally, when the index lost 2.3% in its fourth year. Another measure from Oppenheimer’s Ari Wald, who stuck to historical data from bull markets that lasted longer than four years, found that stocks average a 20% gain in their fourth year. Without any traditional warnings, such as narrowing breadth and defensive leadership, the technical analyst said he expects the bull cycle could extend into 2026. Indeed, there are plenty of forces that continue to be supportive of the rally. An artificial intelligence trade that is lifting the entirety of the market, for one, as well as the restart of the Fed’s easing cycle, and still-strong corporate earnings that show executives are deftly navigating business challenges. In such an environment, CFRA’s equity analysts say that growth stocks will continue to benefit in a bull market, as will communication services and information technology. Yet, there is also no shortage of concerns still plaguing investors: worries of an AI “bubble” that can burst in the coming years, an ongoing government shutdown, a weakening labor market, higher inflation, and a ballooning fiscal deficit, among others. Plus, there’s Trump’s renewed threat of sky-high tariffs on China, which nearly derailed this bull market it April and knocked it back by 2% on Friday. “Even though CFRA thinks the bull market has a good chance of celebrating its fourth birthday, history says it may be a volatile one,” CFRA’s Stovall wrote.
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