The S&P 500 gained 60.7% in the first two years of the current bull market, ranking fourth out of 13 cyclical bulls that lasted at least two years (table, above). The S&P 500 has added a modest 4.4% in year three, on average.Not surprisingly, returns were lower for the five cases where the bulls ended in year three (-5.9%) than the seven that continued into year four (13.1%). Bull markets do not die of old age.
Three were killed by recessions. A fourth fell victim to the Fed, with the August 1968 cut reversed in December. The fifth was spurred by the European sovereign debt crisis and U.S. credit downgrade in mid-2011.
The table above underscores NDR’s view that absent a Fed policy error, hard landing, or external shock, the path of least resistance is a continuation of the bull market.
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