The S&P 500 is in a bull market. Here’s what it means and how long the bull could run

The S&P 500 is now in what Wall Street calls a bull market, meaning the index is up 20%. or from the most recent low.

Here are some answers to questions about bull and bear markets:

Why is it called a bull market?

Wall Street’s nickname for the emerging stock market is a bull market because the bulls charge, said Sam Stovall, chief investment strategist at CFRA. Conversely, bears sleep, so bears represent a retreating market.

When did the new bull market begin?

This latest bull market is thought to have started on October 13, 2022, a day after the S&P 500 closed at its most recent low of 3,577.03.

Why is the market up?

By and large the economy has defied forecasts by not falling into recession, at least not yet.

Markets tumbled last year on fears of how the worst inflation in decades could destroy the economy. More precisely, Wall Street was spooked by the Federal Reserve’s aggressive actions to combat high inflation.

The central bank has raised interest rates to their highest level since 2007, from near zero at the start of last year. Its purpose is to reduce inflation by slowing the economy and lowering prices for stocks, bonds, and other investments. That has pushed many investors into recession for months, but a remarkably resilient job market has kept the economy afloat.

Meanwhile, inflation has eased since peaking last summer. Wall Street expects the Fed to stop raising interest rates soon.

Both the Dow Jones Industrial Average and the Nasdaq are already in bull markets, having entered November and May respectively.

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Is everything good?

Rarely. The central bank has yet to raise interest rates. Even if it keeps rates steady at its next meeting, the first time it has done so in more than a year, expectations among traders are that the central bank will resume hikes in July. Ultimately it is hoped that this will be the last rate hike, but continued inflation could push it higher.

This continues to put pressure on the economy as a whole and particularly on the banking and manufacturing industries, which have already shown some cracks.

Most of the gains for the S&P 500 this year have come from a small group of stocks, which critics say is unsustainable. Apple (+30%), Microsoft (+44%) and Alphabet (+25%), all companies with the highest market capitalizations in the S&P 500, outperformed the index. While half of the stocks in the index have fallen so far in 2023, their large size gives added weight to their movements in the index.

How long do bull markets usually last?

Since 1932, bull markets have lasted an average of 5 years and the S&P 500 has seen a gain of 177.8%. The longest bull market began in March 2009, at the end of the Great Recession, and has been roaming Wall Street for nearly 11 years.

When was the previous bull market?

A previous bull market began on March 23, 2020, as the market recovered from a lightning-fast bear market caused by the onset of the global pandemic. That bull market was the shortest since 1932, lasting about 21 months, according to data from S&P Dow Jones Indices. However, the S&P 500 doubled (up 114.4%).

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Were we just in a bear market?

By entering a bull market, the S&P 500 effectively ended the bear market that began on January 3, 2022. Officially, the bear market is considered to have ended on October 12, 2022.

Announcing the end of a bear market It may seem arbitrary, and different market watchers use different definitions, but it provides a useful marker for investors.

How mean was that bear?

The now dead bear market lasted nine months and saw a 25.4% decline. It was pretty tame as far as bear markets go. Since 1950, the average bear market has lasted 13 months and the S&P 500 has fallen 34.2%. Since 1929, the average bear market has lasted 19.6 months and the S&P 500 has fallen 39.4%.

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