“I know I used to be crazy. I know I used to be fun. You say I used to be wild. I say I used to be young.” – Miley Cyrus
Despite the macro headwinds and ongoing conflict, the S&P 500 recently notched a new all-time high, hitting 7,100. The rebound off the Iran war lows of 6,343.72 on March 30th has been ferocious and swift, a classic V-shaped bounce. But now what? We think the bull market continues to run, but with higher volatility, and more sharp drawdowns may be likely. We point out that we are no longer in an early-stages young bull market, but we are now at least middle-aged and markets react differently. The first 6 months of a bull market, coming off the bear market lows, are typically the strongest. Going back to 1928, 20 out of 27 bull markets have seen the strongest performance in the first half of the run, about 74% of the time. Historically, this bull market has 1-2 years and 40-50% more potential upside to go.
This current bull market is 30 months old, which is roughly middle-aged, but we feel that it has legs to continue. Since WWII, the average bull market lasts 4.4 years (54 months) with an average gain trough-to-peak of 152%. The longest bull run on record was 1987-2000, which lasted 12.3 years and during which markets gained 582%. After the very short COVID bear market, we also had the shortest bull market; the 2020-2022 run lasted only 21 months, although gained an impressive 114%. The last 40 years have seen bull markets last longer and generate stronger returns than average.
Bull markets last significantly longer than bear markets (on average 4.4 years vs. 0.9 years for a bear), and since the 1970’s bull markets have been lasting longer and pushing higher. But we are no longer in the early innings — as a middle-aged bull we need to be more prepared for volatility and the eventual late cycle shifts. But for now, earnings growth and transformative technology (AI) should be strong drivers for the bull to market to push on higher and longer.