Markets

Is This a New Bull Market? Or the Same Old Bear?

The rally since March has been historic, but it still needs to prove itself.

Stocks have rallied so sharply in the past few months that it prompts a question: Are we in a new bull market? With the S&P 500 index up 36% since its March 23 low through mid June, the answer seems an obvious yes. And yet, plenty of veteran Wall Streeters say the bull isn’t official yet, and we’ve seen some cracks in the rally.

Conventional wisdom says stocks are in a bull market once they’re up at least 20% from the market’s low. (A bear market is typically thought of as a 20% drop from the high.) But given that bear markets are often punctuated by powerful rallies that ultimately fade, it’s important to add a time element to a bull-market assessment. Sam Stovall, the chief investment strategist at investment research firm CFRA, defines a bull market as a gain of at least 20% plus a span of six months without the market undercutting its prior low.

Official or not, however, Stovall is a bull. CFRA’s 12-month target for the S&P 500 is 3435, 13% higher than its June 12 close. “I think the March 23 low will eventually be regarded as the start of the new bull market,” says Stovall. “The reason for my optimism is the massive amount of stimulus” injected into the market and the economy by the Federal Reserve and Congress. CFRA is most bullish on the communication services, health care and information technology sectors.

Doug Ramsey, chief investment officer and portfolio manager at the Leuthold Group, remains dubious. “The current rally is either the first up-leg of a new bull market or the second-largest bear-market rally in the past 125 years,” he says. On the one hand, you’ve got unprecedented monetary and fiscal stimulus. On the other hand, says Ramsey, price-earnings multiples at the market’s March low remained much higher than in other post-WWII market troughs, making it the priciest bear-market low in history—if it stands. “I still think there’s a chance we could break below those lows,” he says. “I’m trying to look at the glass as half-full, but how can we embark on a multiyear bull market when we’re at valuations that are so much higher than what they were at the same stage of the last bull market?”

A close above the 3386 level for the S&P 500, eclipsing its February high, would settle the question of bull-market status. But investors who wait for that will have missed out on a 50% gain. Conversely, “even if you’re very confident that a new bull market has begun, that doesn’t mean you can’t lose serious money from here,” Ramsey says.

Stay in the game. The debate makes clear that trying to time your investments to coincide with market tops and bottoms is rarely the best strategy. Keeping your portfolio aligned with your age and stage in life, with more-frequent rebalancing in volatile markets, is a better way to reap more-consistent rewards.

It’s also important to remember that even young bulls need an occasional breather. It took only 50 trading days for the S&P 500 to climb nearly 40% from its March low—the biggest 50-day surge since the 1950s, eclipsing the lightning-fast start of the 1982 bull market. That’s a good sign, says senior market strategist Ryan Detrick at investment firm LPL Financial. He says stock prices could be higher this time next year. More immediately, the market looks a little frothy. “We have near-term worries given this historic run,” he says.

Don’t be surprised by more volatility—a hallmark of both the bull and bear aspects of this market. As Detrick reminds us: “There are no roller coasters that can replicate what stocks have done so far in 2020.”

Most Popular

Your Guide to Roth Conversions
Special Report
Tax Breaks

Your Guide to Roth Conversions

A Kiplinger Special Report
February 25, 2021
The 12 Best Tech Stocks to Buy for 2022
tech stocks

The 12 Best Tech Stocks to Buy for 2022

The best tech-sector picks for the year to come include plays on some of the most exciting emergent technologies, as well as several old-guard mega-ca…
January 3, 2022
How to Know When You Can Retire
retirement

How to Know When You Can Retire

You’ve scrimped and saved, but are you really ready to retire? Here are some helpful calculations that could help you decide whether you can actually …
January 5, 2022

Recommended

Stock Market Today (1/21/22): Nasdaq Sinks Again, Ends Worst Week Since 2020
Stock Market Today

Stock Market Today (1/21/22): Nasdaq Sinks Again, Ends Worst Week Since 2020

A negative earnings reaction for Netflix (NFLX) and options expiration sparked a volatile session for stocks.
January 21, 2022
22 Best Retirement Stocks for an Income-Rich 2022
dividend stocks

22 Best Retirement Stocks for an Income-Rich 2022

Ideally, your retirement stocks will help you generate a sizable and reliable income stream. These 22 dividend payers make the grade.
January 21, 2022
Stock Market Today (1/20/22): Foiled Again! Sizable Snap-Back Fizzles Late
Stock Market Today

Stock Market Today (1/20/22): Foiled Again! Sizable Snap-Back Fizzles Late

The Nasdaq fell even further into correction territory Thursday after early gains collapsed in the afternoon.
January 20, 2022
Stock Market Today (1/19/22): Nasdaq Closes in Correction Territory
Stock Market Today

Stock Market Today (1/19/22): Nasdaq Closes in Correction Territory

After a choppy trading session for stocks, all three major benchmarks ended the day in the red.
January 19, 2022