It has been a year since the pandemic first blinded the US, turning many jobs, education and socializing into stay-at-home events.
But it hasn’t been until about 11 months since the new bull market for the S&P 500 started.
That is one of the two main reasons why analysts at Truist Wealth believe a continued rise in the S&P 500 index SPX,
still has room to run.
This chart shows that the current bull-market run of the S&P 500 could be both too short-lived and too limited, in terms of price increases, to pass quickly, at least if the performance of the past six decades applies during a pandemic.
The current S&P 500 bull market is too short, lean on returns.
Truist wealth
The bars show that the average S&P 500 bull market since 1957 when the benchmark was first introduced has resulted in price rises of 179% and the good times lasted an average of 5.8 years, which is on par with the current returns of 76% for the benchmark in less than a year.
US stocks started to move into correction territory about 12 months ago, after the coronavirus pandemic first began to cut off travel and trade globally, a difficult period followed by the major US stock benchmarks hitting new lows in late March.
But after quickly recouping their losses in 2020, stocks continued to hit a string of record highs this year, thanks in part to the trillion-dollar fiscal and monetary stimulus that sloshed through the economy, as policymakers expect. Supporting households hit hard by the crisis and maintaining confidence and liquidity on Wall Street.
More recently, those same forces have also raised concerns that post-COVID good times may already have been fully worked into stock prices and other financial assets, and that high-flying stocks and riskier parts of the debt market could get into trouble. when inflation runs wild, or the financing costs for businesses and consumers become too high.
The S&P 500, Dow Jones Industrial Average DJIA,
and Nasdaq Composite Index COMP,
were hit with volatile patches last week as the 10-year-old treasury TMUBMUSD10Y,
yields spiked, and again on Wednesday when benchmark bond yields rose about 1% from a year earlier, or nearly 1.47%.
All three major stock indices closed lower for the second straight day on Wednesday, as bond yields soared and technology stocks returned to sell pressure.
Related: Cathie Wood’s high-flying ARK ETF just hit a bear market – a sign of the times?
So how does today’s emergence from a low-rate environment compare to the 1950s?
Truistic analysts also have a chart showing that interest rates on the S&P 500 and the 10-year Treasury rose together in the 1950s.
Stocks, bond yields go up together.
Truist
“While there are many differences between the 1950s and today, there were some similarities, such as very high US debt as a result of the war, an activist Fed and a post-war boom in the economy,” wrote Keith Lerner, chief market strategist. at Truist, in a Wednesday note. “Interest rates have gone up from 1.5% at the start of the decade to nearly 5% at the end. Despite two recessions, the S&P 500 rose 257% by price and 487% by total return over the decade. “
This time, Federal Reserve officials have also vowed repeatedly to avoid tightening monetary conditions while keeping policy rates at zero and the $ 120 billion-a-month bond buy-back program remaining open until the economy has fully recovered from the pandemic.
And bond investors with starving bonds welcomed the hustle and bustle of highly ranked companies this week to borrow, amid the prospect of higher borrowing costs.
See: Businesses are rushing to borrow money after last week’s extreme interest rate spike hit a quiet spot