We’re officially in a bull market.
It happened on June 8 (while I was at the beach). The market closed a hair higher than 20% above its October 12 low, as measured by the S&P 500 Index.
And it’s holding. Since then, the market has risen almost 3% higher.
Stock prices have been moving gradually higher since last October, of course. But for much of that time it has been quite a bumpy ride – with the market often making gains and then giving them back just as quickly, as investors worried about the Federal Reserve’s rate hikes, inflation figures and hints of a recession.
But the pivot seems to have come about on March 10, the day Silicon Valley Bank failed and triggered a mini banking crisis that took a few other regional banks down.
That turn for the better can be seen in this chart…
In the roughly three months since that dark day, the S&P 500 is up almost 14%. Keep in mind that the average annual return is about 10% since the S&P 500’s inception in 1928.
I wrote about the pivot back on April 19, predicting that we could see good gains going forward.
And that’s just what has happened over the past two months.
My reasoning back then was that the banking crisis did some of the Fed’s job for it by creating tighter lending conditions. As a result, I argued, Chairman Jerome Powell and his colleagues would be able to pause their campaign of relentlessly higher interest rates.
They did exactly that last week, saying that “tighter credit conditions for households and businesses are likely to weigh on economic activity, hiring and inflation.” And that meant the Fed could take a break to assess the implications of the hikes it made over the past year.
Much of this may already sound familiar…
But there’s additional good news that could push stock indexes even higher in coming months…
A recession in 2023 looks even less likely now.
More Room for Optimism
While many economists were predicting a recession sometime this year, quite a few of them are now backing off that forecast.
Goldman Sachs recently reduced the chance of recession in the next 12 months from 35% to 25%. The investment bank cited the resolution of the debt ceiling crisis in Congress, growth of disposable income in U.S. households, stabilization of the housing market and a gradual cooling of the red-hot labor market.
Similarly, Bank of America’s economists recently revised their forecast, saying that any recession that might occur will be later and more moderate than they once predicted.
And the media – which we know loves to paint the bleakest possible picture of the economy – is also coming around. “The Case for a 2023 US Recession Is Crumbling,” read a recent CNN headline.
I addressed this idea in the Oxford Club Members-only Oxford Insight newsletter back in May. I noted that the recession so many observers were predicting was like the Godot character in the famous play Waiting for Godot by Samuel Beckett: always about to arrive but never actually showing up.
To be sure, there will be more difficulties and twists and turns in this bull market. The Fed could hike rates again later this year (possibly as early as late July), inflation could spike again, a confrontation with Russia or China could derail both the U.S. economy and the stock market…
And there are a dozen other things that could kill this bull.
But for now, things are looking bright for investors.
That’s why right now is the time to be invested in stocks. Because 78% of the stock market’s best days happen near the end of a bear market or during the first two months of a new bull market, according to research by Hartford Funds.
Don’t miss them… because you won’t get a second bite at this bull market.