The S&P 500 is in a bull market. Here’s what that means and how long the bull can run
The S&P 500 is now in what Wall Street refers to as a bull market, meaning the index is up 20% or more from the last low.
Here are some answers to questions about bull and bear markets:
WHY IS IT CALLED A BULL MARKET?
Wall Street’s nickname for a rising stock market is a bull market because bulls charge, said Sam Stovall, investment strategist at CFRA. In contrast, bears hibernate, so bears represent a retreating market.
WHEN DID THE NEW BULL MARKET START?
This latest bull market is considered to have begun on October 1[ads1]3, 2022, one day after the S&P 500 closed at its most recent low of 3,577.03.
WHY HAS THE MARKET RARLED?
Largely because the economy has defied predictions by not falling into a recession, at least not yet.
Markets fell last year on fears of how the worst inflation in decades would wreak havoc on the economy. More precisely, Wall Street was spooked by the aggressive measures taken by the Federal Reserve to combat high inflation.
The Fed has raised interest rates to the highest level since 2007, up from virtually zero early last year. The aim was to drive down inflation by slowing the economy and reducing the prices of shares, bonds and other investments. That left many investors bracing for a recession for months, but a remarkably robust labor market has kept the economy afloat.
However, inflation has slowed since the peak last summer. That has led Wall Street to hope that the Fed will soon stop raising interest rates.
Both the Dow Jones Industrial Average and the Nasdaq are already in bull markets, having entered them in November and May, respectively.
SO EVERYTHING IS GOOD?
Hardly. The Fed is probably still not done raising interest rates. Although it holds rates steady at its next meeting, which will be the first time it has done so in more than a year, the expectation among traders is that the Fed will resume hiking in July. The hope is that it will ultimately be the last rate hike, but persistent inflation could negate that.
It keeps up the pressure on the overall economy and especially on the banking and manufacturing industries, which have already shown some cracks.
Most of the gains for the S&P 500 this year have come from just a small group of stocks, which critics say is unsustainable. Apple (+30%), Microsoft (+44%) and Alphabet (+25%), the companies with the highest market capitalizations in the S&P 500, all outperformed the index. Their sheer size gives their movements added weight to the index, while nearly half of the stocks in the index have fallen so far in 2023.
HOW LONG DO BULL MARKETS TYPICALLY LAST?
Since 1932, bull markets have lasted an average of nearly 5 years, with the S&P 500 seeing a gain of 177.8%. The longest bull market began in March 2009, near the end of the Great Recession, and roamed Wall Street for nearly 11 years.
WHEN WAS THE PREVIOUS BULL MARKET?
The previous bull market began on March 23, 2020, as the market recovered from a lightning-fast bear market caused by the outbreak of the global pandemic. That bull market was the shortest dating back to 1932, lasting about 21 months, according to data from S&P Dow Jones Indices. Nevertheless, the S&P 500 more than doubled (up 114.4%).
WEREN’T WE JUST IN A BEAR MARKET?
By entering a bull market, the S&P 500 effectively ended the bear market that began on January 3, 2022. Officially, the bear market is considered to have ended on October 12, 2022.
Declares the end of a bear market may seem arbitrary, and different market watchers use different definitions, but it offers a useful marker for investors.
WHERE MEN WAS THAT BEAR?
The now defunct bear market lasted about nine months and saw a 25.4% drop. It was pretty tame as bear markets go. Since 1950, the average bear market has lasted 13 months and the S&P 500 fell 34.2%. Since 1929, the average bear market has lasted 19.6 months and the S&P 500 has fallen 39.4%
