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It’s been a year since the pandemic first blinded the United States, turning many jobs, forms of schooling, and ways of socializing into events at home.
But it wasn’t until about 11 months that the new S&P 500 bull market began.
This is one of the two main reasons why analysts at Truist Wealth believe that the S&P 500 SPX Index will recover strongly,
still has room to run.
This chart shows that the current S&P 500 bull run may be both too short and too limited, in terms of price gains, to end anytime soon, at least if the past six decades of performance apply for a long time. pandemic.
The current S&P 500 bull market is too short, lean in the returns department.
Authentic wealth
The bars show that the average S&P 500 bull market since 1957, when the benchmark was first introduced, resulted in price gains of 179% and the good times lasted 5.8 years on average. , which compares to the current return of 76% for the benchmark in less than a year.
U.S. stocks began to fade into correction territory about 12 months ago, after the coronavirus pandemic began disrupting travel and trade around the world, a difficult period that was followed by major indices. benchmark US equities which hit new lows at the end of March.
But after quickly recouping their losses in 2020, this year’s stocks continued to hit a series of all-time highs, in part thanks to the billions of dollars in fiscal and monetary stimulus that have slipped through the economy, such as the watch policy makers. support households hard hit by the crisis and keep confidence and liquidity high on Wall Street.
More recently, these same forces have also raised concerns that the good times, post-COVID, may already be fully embedded in stock prices and other financial assets, and that high-profile stocks and parties riskier debt market could be in trouble. if runaway inflation sets in or if borrowing costs for businesses and consumers become too high.
The S&P 500, Dow Jones Industrial Average DJIA,
and Nasdaq Composite Index COMP,
were hit by volatile patches last week, such as 10-year Treasury TMUBMUSD10Y,
the yield skyrocketed, and again on Wednesday when benchmark bond yields were spotted about 1% higher from a year earlier, or nearly 1.47%.
All three major stock indexes closed lower on Wednesday for a second day in a row, as bond yields climbed and tech stocks were once again pressured to sell.
Related: Cathie Wood’s Highflying ARK ETF Has Just Entered a Bear Market – A Sign of the Times?
So how does the current rise in a low interest rate environment compare to the 1950s?
True analysts also have a chart showing that the yields on the S&P 500 and the 10-year Treasury rose together during the 1950s.
Equities and bond yields climb together.
Truist
“While there are many differences between the 1950s and today, there were some similarities, such as very high American debt levels as a result of the war, a militant Fed and a boom in the post-war economy, ”wrote Keith Lerner, chief market strategist. to Truist, in a note on Wednesday. “Interest rates went from 1.5% at the start of the decade to almost 5% at the end. Over the decade, despite two recessions, the S&P 500 rose 257% on a price basis and 487% on a total return basis. “
This time around, Federal Reserve officials have also repeatedly pledged to avoid tightening monetary conditions, while keeping policy rates near zero and its $ 120 billion bond purchase program by months open until the economy fully recovers from the pandemic.
And yielding bond investors welcomed the rush of highly rated companies this week to borrow, amid the prospect of higher borrowing costs.
See: Businesses rush to borrow after last week’s extreme rate hike that struck calm
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