MW The 2-year-old bull market has just done something that shows it has further to run

By Jamie Chisholm

History shows that a five-month winning streak practically always sees stocks higher a year later

Saturday marks the two-year anniversary of the current bull market. Since hitting its cycle bottom on Oct. 12, 2022, the S&P 500 SPX is up nearly 62%. The stock barometer has gained 21.2% already in 2024, registering 44 record closes along the way.

Inevitably, those of a bearish bent have been getting more anxious as the S&P 500 ascends into the rarefied air near 6,000. At such peaks dizzy climbers are more prone to silly mistakes, they warn.

Ryan Detrick, chief market strategist at Carson Group, is having none of that. Carson turned bullish in Nov. 2022, dismissing those who warned that stocks would continue to struggle as recession loomed for the U.S.

In fact, Detrick notes, the economy appears to be warming up, not slowing down, and importantly the bull market is actually quite young. "That's right, a two-year bull market historically has plenty of life left, with the average bull market since 1950 lasting more than five years and gaining more than 180%," he says.

Detrick reminds us that the market Cassandras have been consistently vocal during this current rally. He recalls that a year ago there were many observers saying that a relatively weak first year of a bull market - stocks were up about 20% - meant the recovery could not be sustained.

"We noted this was probably the wrong way to look at it and suggested being open to the possibility of huge gains in year two. Well, after more than 30% gains during the second year of the bull market we would say that indeed was the way to look at things," Detrick says.

Of course, the crucial question for investors is whether they'll be celebrating the bull's third birthday. Detrick thinks they will, though history suggests traders should not expect such big gains.

"We found that out of 16 previous bull markets (after bear or near bear markets), 12 of them made it to their third birthday, with an average gain of about 8% and a median return of nearly 10% in year three, pretty much what your average year does," says Detrick.

Detrick does recognize that there could be near-term weakness, with election-year Octobers often showing volatility. Still, if we're talking seasonals then November and December tend to be pretty good for stocks.

But there's one more statistical nugget that leaves Detrick confident that the bull will be getting a third cake. The S&P 500 has just registered five positive months in a row, and Detrick found that since 1950 there have been 29 other such winning streaks and stocks were higher a year later 28 of those times, a win rate of 97%.

"Yes, this is just one signal and we would never suggest investing based on a single data point, but looked at in the context of all the bullish signals we continue to see, it further reinforces our overall bullish stance," he adds.

Markets

U.S. stock-index futures (ES00) (YM00) (NQ00) are lower as benchmark Treasury yields BX:TMUBMUSD10Y nudge higher. The dollar index DXY is down, while oil prices (CL.1) dip and gold (GC00) is trading around $2,636 an ounce.

   Key asset performance                                                Last       5d      1m     YTD     1y 
   S&P 500                                                              5780.05    1.41%   3.29%  21.18%  32.89% 
   Nasdaq Composite                                                     18,282.05  2.03%   4.05%  21.79%  34.68% 
   10-year Treasury                                                     4.096      13.40   43.90  21.51   -53.09 
   Gold                                                                 2654.2     -0.71%  1.84%  28.11%  36.40% 
   Oil                                                                  75.15      0.94%   8.54%  5.36%   -14.33% 
   Data: MarketWatch. Treasury yields change expressed in basis points 

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The buzz

U.S. economic data due on Friday include the producer price index for September, released at 8:30 a.m. Eastern, and consumer sentiment for October, published at 10:00 a.m.

Fed officials speaking include Chicago Fed President Austan Goolsbee giving opening remarks at a community banking event at 9:45 a.m., Dallas Fed President Lorie Logan talking at a financial services conference at 10:45 a.m., and Federal Reserve Gov. Michelle Bowman making comments on innovation and entrepreneurship at 1:10 p.m.

Tesla shares $(TSLA)$ are down more than 5% in premarket action after Elon Musk late Thursday unveiled the company's Cybercab robotaxi.

The U.S. third quarter earnings season kicks off proper with results from JPMorgan Chase $(JPM)$, Wells Fargo $(WFC)$, and Bank of New York Mellon $(BK)$. BlackRock $(BLK)$ reported total assets under management of $11.5 trillion.

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The chart

The Schwab Trading Activity Index, known as the STAX, doesn't track investor sentiment but measures what traders are actually doing with their accounts. We can see from the chart below provided by Bespoke Investment how the STAX showed the flurry of retail investor activity during the COVID-linked meme-stock craze and market rally. However, as the S&P 500 hit fresh record highs this September, the STAX fell to its lowest since January.

"This tells us that there's less complacency, enthusiasm, and overall interest in the market right now versus 2021 levels, which is good if you're a long-term bull," says Bespoke.

Top tickers

Here were the most active stock-market tickers on MarketWatch as of 6 a.m. Eastern.

   Ticker  Security name 
   TSLA    Tesla 
   NVDA    Nvidia 
   GME     GameStop 
   NIO     NIO 
   DJT     Trump Media & Technology 
   PLTR    Palantir Technologies 
   AMD     Advanced Micro Devices 
   TSM     Taiwan Semiconductor Manufacturing 
   AAPL    Apple 
   HOLO    MicroCloud Hologram 

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-Jamie Chisholm

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October 11, 2024 06:19 ET (10:19 GMT)

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