The New Bull Market Has Begun, Which Stocks Will Lead the Way?
Zacks Investment Research | May 20, 2020 03:59AM ET
The bear market is over, and a new bull market has begun!
The Dow, on March 26th, after just 11 days in bear market territory (the shortest bear market ever), came roaring back, gaining more than 20% from its lowest close, officially exiting their bear and beginning a new bull market.
The S&P (NYSE:SPY) followed suit on April 8th, and the Nasdaq on April 14th.
Currently, the Dow is up 31.9% from its lowest close, the S&P is up 32.5% from its lowest close, and the Nasdaq is up 36.1% 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 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.
But it’s worth noting that our economy and financial system back then were on pretty shaky ground and that’s what led to the pullback.
A starkly different situation leading up to this one. In fact, the economy going into this was called the strongest economy of our lifetime with 50-year low unemployment, 20-year high in household income, and near record high in consumer confidence.
Instead, it was a virus outbreak that caused the pullback. But since the U.S. was in such great shape prior to this, it makes it all the more likely that we will bounce back even bigger and faster.
Add in the nearly $10 trillion in monetary and fiscal stimulus, not to mention near zero interest rates, and it looks like stocks are poised to soar.
More . . .
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