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Last Thursday marked a remarkable milestone for the S&P 500 as it finished more than 20% above its October lows, signifying the commencement of a new bull market. This rise places the S&P 500 at its loftiest point since August 2022. What makes this rebound more impressive is that it concluded a 248-trading day bear run, the longest since 1948, per a Yahoo Finance article.
This robust ascent occurred amidst a backdrop of a vigorous rate hike campaign by the Federal Reserve, the most assertive in the past forty years. This period was also riddled with banking crises at a regional level and persistent fears of an impending recession, which have yet to fully come to fruition.
Potential of the Bull: Historical Trends
Bank of America's research has shed light on the promising future of the S&P 500. According to historical data from the 1950s, the S&P 500 has risen 92% of the time in the 12 months succeeding the onset of a bull market. This is significantly higher than the 75% average increase observed over any 12-month period, per the same article.
Historically, the path to prosperity for stocks has not been a straight line. Ryan Detrick, Chief Market Strategist at Carson Group, studied 13 instances since 1956 where stocks rebounded by 20% from a 52-week low. In the initial three months, stocks typically exhibited volatility, with the benchmark index actually declining by 0.5% on average in the first month after entering bull market territory, per the Yahoo article.
Bondholders to Return to Equities?
The equity strategy team at Bank of America Global Research, led by Savita Subramanian, commented on the return to the bull territory. They suggested that this upward trend could reignite investor interest in equities. They noted that if bondholders experience lower returns or incur negative opportunity costs, particularly if real rates increase, it could incentivize them to pivot back to equities, particularly those that stand to gain from a rise in real rates, such as cyclical stocks.
Road Ahead: Recession Fears Receding
Nevertheless, the long-term outlook has been predominantly positive. Following a 20% rally from market lows, the S&P 500 has averaged a 10% return over the subsequent six months and a substantial 17.7% return over the next 12 months, according to Detrick's research.
Market sentiments and economic indicators hint at a promising future for stocks. The anticipated recession of 2023 has yet to materialize, leading economists to question if it will occur at all. Current economic indicators are hinting at a more resilient economy than previously thought.
Economists Dial Back Recession Expectations
Wells Fargo's economics team recently became the latest to revise its recession forecast, now projecting its onset in early 2024, per Yahoo Finance. The firm attributed this change to recent data showing an economy that is not yet on the brink of recession. They noted that while they still anticipate the impacts of monetary tightening and reduced credit availability to dampen growth, the economy has shown greater resilience than expected.
Wells Fargo isn't alone in this optimistic turn. Goldman Sachs recently cut its recession odds for this year from 35% to 25%. Similarly, Capital Economics hinted at delaying its prediction for a third-quarter recession.
ETFs in Focus
Against this upbeat backdrop, if you have faith in the potential market breadth of Wall Street, investors may track S&P 500 ETFs like Vanguard S&P 500 ETF (VOO - Free Report) , iShares Core S&P 500 ETF (IVV - Free Report) and SPDR S&P 500 ETF Trust (SPY - Free Report) .
Investors can also play the growth part of the index with SPDR Portfolio S&P 500 Growth ETF (SPYG - Free Report) and the value part of the index with SPDR Portfolio S&P 500 Value ETF (SPYV - Free Report) . SPDR Portfolio S&P 500 High Dividend ETF Fund (SPYD - Free Report) is a good bet for the dividend plays of the index.
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New Bull Market of S&P 500 ETFs: Here to Stay?
Last Thursday marked a remarkable milestone for the S&P 500 as it finished more than 20% above its October lows, signifying the commencement of a new bull market. This rise places the S&P 500 at its loftiest point since August 2022. What makes this rebound more impressive is that it concluded a 248-trading day bear run, the longest since 1948, per a Yahoo Finance article.
This robust ascent occurred amidst a backdrop of a vigorous rate hike campaign by the Federal Reserve, the most assertive in the past forty years. This period was also riddled with banking crises at a regional level and persistent fears of an impending recession, which have yet to fully come to fruition.
Potential of the Bull: Historical Trends
Bank of America's research has shed light on the promising future of the S&P 500. According to historical data from the 1950s, the S&P 500 has risen 92% of the time in the 12 months succeeding the onset of a bull market. This is significantly higher than the 75% average increase observed over any 12-month period, per the same article.
Historically, the path to prosperity for stocks has not been a straight line. Ryan Detrick, Chief Market Strategist at Carson Group, studied 13 instances since 1956 where stocks rebounded by 20% from a 52-week low. In the initial three months, stocks typically exhibited volatility, with the benchmark index actually declining by 0.5% on average in the first month after entering bull market territory, per the Yahoo article.
Bondholders to Return to Equities?
The equity strategy team at Bank of America Global Research, led by Savita Subramanian, commented on the return to the bull territory. They suggested that this upward trend could reignite investor interest in equities. They noted that if bondholders experience lower returns or incur negative opportunity costs, particularly if real rates increase, it could incentivize them to pivot back to equities, particularly those that stand to gain from a rise in real rates, such as cyclical stocks.
Road Ahead: Recession Fears Receding
Nevertheless, the long-term outlook has been predominantly positive. Following a 20% rally from market lows, the S&P 500 has averaged a 10% return over the subsequent six months and a substantial 17.7% return over the next 12 months, according to Detrick's research.
Market sentiments and economic indicators hint at a promising future for stocks. The anticipated recession of 2023 has yet to materialize, leading economists to question if it will occur at all. Current economic indicators are hinting at a more resilient economy than previously thought.
Economists Dial Back Recession Expectations
Wells Fargo's economics team recently became the latest to revise its recession forecast, now projecting its onset in early 2024, per Yahoo Finance. The firm attributed this change to recent data showing an economy that is not yet on the brink of recession. They noted that while they still anticipate the impacts of monetary tightening and reduced credit availability to dampen growth, the economy has shown greater resilience than expected.
Wells Fargo isn't alone in this optimistic turn. Goldman Sachs recently cut its recession odds for this year from 35% to 25%. Similarly, Capital Economics hinted at delaying its prediction for a third-quarter recession.
ETFs in Focus
Against this upbeat backdrop, if you have faith in the potential market breadth of Wall Street, investors may track S&P 500 ETFs like Vanguard S&P 500 ETF (VOO - Free Report) , iShares Core S&P 500 ETF (IVV - Free Report) and SPDR S&P 500 ETF Trust (SPY - Free Report) .
Investors can also play the growth part of the index with SPDR Portfolio S&P 500 Growth ETF (SPYG - Free Report) and the value part of the index with SPDR Portfolio S&P 500 Value ETF (SPYV - Free Report) . SPDR Portfolio S&P 500 High Dividend ETF Fund (SPYD - Free Report) is a good bet for the dividend plays of the index.