Economy

Why is it possible that the bull market movement of the S&P 500 is just beginning

Why is it possible that the bull market movement of the S&P 500 is just beginning

It has been a year since the pandemic first surprised the United States, transforming many jobs, forms of education, and methods of socialization into stay-at-home events.

However, only 11 months have passed since the start of the new bull market for the S&P 500.

This is one of two main reasons why analysts at Truist Wealth believe there is a sustainable rally in the S&P 500 SPX.
-1.31%
There’s still room to run.

This chart shows that the current bull market movement of the S&P 500 may be very short-lived and limited, in terms of price gains, to end anytime soon, at least if the past six decades of performance during the pandemic are implemented.

The bull market for the S&P 500 today is very short, and light in the returns section.

Real wealth

The columns show that the average bull market for the S&P 500 since 1957, when the benchmark was first introduced, has resulted in price gains of 179% and that good times have lasted 5.8 years on average, compared to today’s return of 76%. To the standard in less than a year.

US stocks are starting to faint In the correction zone about 12 months ago, After the coronavirus pandemic first began to cut travel and trade around the world, a difficult period followed by major US stock indices that hit new lows in late March.

But after quickly compensating for their losses in 2020, stocks this year continued to touch a series of all-time highs, thanks in part to the trillions of dollars in fiscal and monetary stimulus that has been slowing in the economy, as policymakers look to support families hard hit by the crisis. And maintain confidence and liquidity high on Wall Street.

Lately, these same forces have also raised concerns that the good times, post-COVID, may already be fully integrated into the prices of stocks and other financial assets, and that riskier stocks and more risky parts of the debt market could head into trouble if hyperinflation persists, Or, borrowing costs for businesses and consumers have risen dramatically.

S&P 500, DJIA,
-0.39%
And the Nasdaq Composite Index COMP,
-2.70%
It was hit with volatile patches last week, like the 10-year Treasury TMUBMUSD10Y,
1.482%
The yield was higher, again on Wednesday when yields on benchmark bonds were posted about 1% higher than the previous year, or near 1.47%.

All three are big Stock indices closed lower on Wednesday for a second day In a row, bond yields increased and technology stocks were once again under selling pressure.

Related: Cathie Wood’s high-performance ARK ETF has just entered a bear market – a sign of the times?

So how does today’s rise from a low-price environment compare to the 1950s?

Truist analysts also have a chart showing that the rates of S&P 500 and 10-year Treasury yields rose in coordination through the 1950s.

Stocks and bond yields are rising together.

Truth

“While there are many differences between the 1950s and today, there were some similarities, such as very high debt levels in the United States as a result of the war, a vibrant Fed presence, and a booming economy after the war,” wrote Keith Lerner, chief market strategist. In Truist, on Wednesday’s note. Interest rates rose from 1.5% at the start of the decade to nearly 5% at the end of the decade. During the decade, despite two recessions, the S&P 500 gained 257% on a price basis and 487% on a total return basis.

This time, Fed officials have also pledged time and time again to avoid tightening monetary conditions, while keeping interest rates close to zero and the $ 120 billion per month bond-buying program open until the economy fully recovers from the pandemic.

Return-hungry bond investors welcomed a rush among top-rated companies this week to borrow, amid the prospect of higher borrowing costs.

We see: Companies are racing to borrow after last week’s sharp rise in interest rates hit a quiet patch

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