WAIT, is this the first or third year of the bull market?This is the debate among the chartists who hate rounding numbers. From Sam Stovall’s Sector Watch:
Was it back on March 9, 2009, after the S&P 500 endured a 17-month decline of 57%? If so, we are coming up on the third anniversary of this bull market move. However, some are beginning to question if the NEW bull market actually began on October 3, 2011. Granted, the “500” did not decline by 20% or more on a closing basis, the traditional measure of a bear market. Indeed, the S&P 500 fell 19.4% on a closing basis from April 29, 2011 through October 3.
But there’s more:
However, those arguing to call it a new bull market aren’t giving up that easily. They remind us that the “500” did decline more than 20% on an intra-day basis.
So, we’re either in the beginning of the first year of a bull market or the end of the third year of the bull market. Take your pick.
For those who care about history, Stovall provides a ton of information on what happened in the first and fourth years of bull markets.
Following the conclusion of all 12 recognised bear markets since World War II, the first year average return of 38% was similar to the near-30% average advance following severe corrections. Individual performances for first-year bulls were consistently in the double-digits, with gains ranging from 21% in 1947-48 and 1987-88 to advances of 58% in 1982-83 and 68% in 2009-10. Also, during the first 12 months of the seven new bull markets since 1970, the market was led by such cyclical sectors as Consumer Discretionary, Financials, Industrials, Information Technology, and Materials. However, the Consumer Staples, Telecom Services and Utilities groups, while benefiting from a rising tide that lifted all boats, still lagged the cyclical sectors and the overall market.
During the fourth years of surviving bull markets since 1945 (there were six out of the original 11), however, the S&P 500 rose an average of 12.5%, recording individual returns ranging from a decline of 2.3% in 1952-53, to a near 30% advance in 1985-86. However, the bull market that started in 1962 did not survive to celebrate its fourth anniversary, as it joined the below-average duration bull markets of 1947, 1966, 1970, and 1987. And while consistent double-digit price gains characterised first-year bull market performances, a wider array of results, as well as a lower average advance (from a smaller set of observations), were more consistent in fourth-year bull markets. In addition, while the cyclical sectors led first-year bull markets, the best performing sectors during the fourth year were predominantly defensive in nature: Consumer Staples, Health Care, Materials and Telecom Services.
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