We hear this question a lot; and most of the time it is a foregone conclusion that we will revisit the 2022 stock market lows. War, recession, the Fed, regional banks, commercial real estate… there are so many pessimistic investors out there waiting for large declines to happen. So, a study from Bespoke caught my eye.
Stocks have been in quite the bull market for the last 6+ months. In the 4th quarter of 2022, the S&P 500 moved 6.36% higher. In the 1st quarter of 2023, the S&P 500 moved 7.03% higher. Since the October 12, 2022 low, the S&P 500 is up 14.88%. These moves occurred after a bear market decline of -25.43% into the October 12th lo w.
And that’s what Bespoke’s study asked – what does history say about the last 6 months of strong performance after a bear market? And what is the probability of making new lows? The data is not in your favor if you are bearish. There are 14 events similar to the 2022 bear market turned 2023 bull market, and only 2 of those prior events saw equity weakness from this point. Additionally, even the 1946 line (in chart below) saw stocks end flat over the next 6 months. The technicals of this market continue to point to more gains this year.
Source: Bespoke as of 4/18/23
Sean Dillon, CMT, CFTe
SVP, Investment Strategy
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