How To Trade The New Bull Market As The Economy Begins To Reopen
Zacks Investment Research | May 22, 2020 03:01AM ET
The bull market is back. And stocks have been on a tear.
Pretty amazing, given where we were just a couple of months ago.
On March 11th, just 19 days after hitting all-time record highs, the historic 11-year bull market was stopped in its tracks due to the coronavirus, and a new bear market had begun.
It was the fastest we’d ever seen a bull market turn into a bear.
Stocks plunged as traders braced for the worst with the Dow falling as much as -38.4%, the S&P (NYSE:SPY) falling by -35.3%, and the Nasdaq falling by -32.5%.
But after spending just 11 days in bear market territory, stocks surged by more than 20% from their lowest close to exit their bear market and begin a new bull.
That was the shortest bear market ever.
And it was the fastest we’d ever seen a bear market turn into a bull.
The Dow was first out of the gate, followed by the S&P a week and a half later, and then the Nasdaq a few more days after that.
Currently, the Dow is up 32.2% from its lowest close, the S&P is up 32.8% from its lowest close, and the Nasdaq is up 36.7% from its lowest close, and is actually positive on the year!
And it looks like there’s a lot more upside to go.
In a study of the top 10 bear markets (using the Dow), the rallies that followed have been spectacular. Within a year after a bear market, stocks surge on average of 44.7%. And go on to gain on average of 66.3% by year 3.
And following the biggest bear market in that study (10/2007-3/2009 during the housing/financial crisis, aka the Great Recession), the market gained 63.4% in year 1; 100.6% by year 3; 153.6% by year 5; and more than 357% during the entire 11+ year bull market.
And with many analysts calling for an ‘unprecedented’ recovery, the gains are poised to be even bigger this time.
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