- Wednesday, October 16, 2024
The bull market that commenced one year ago has been deemed one of the feeblest in U.S. history.
Upon analyzing this current bull market in comparison to all others dating back to 1900, some argue that the rally that began in October 2022 was merely a bear market rally. This contention gains weight when considering the recent losses in the U.S. stock market, with the Dow Jones Industrial Average (DJIA) declining in eight out of its last 10 sessions.
The precise commencement date of the bull market varies depending on the market average used. For the purpose of this discussion, the focus will be on the Dow, considering its longer history in comparison to other broad market indices. According to the Dow, the bear market of 2022 hit its lowest point on September 30, 2022, at 28,725.51. By the one-year anniversary of the subsequent rally, which began at the end of September 2023, the Dow had registered a 16.6% increase.
According to Ned Davis Research's bull market calendar, no bull market since 1900 that lasted for at least a year gained as little as the current bull market has in its first 12 months. On average, bull markets lasting a year or more saw a gain of 38.9% during their initial year - more than double the one-year return of the current bull market.
It is important to note that the focus solely on bull markets lasting at least a year assumes that the bull market that started a year ago is still ongoing. However, it is entirely plausible that it concluded on August 1 of this year, which marked the Dow's closing high for the rally thus far. On that day, the Dow closed 24% higher than at the beginning of October 2022 when the current bull market commenced.
The Lackluster Bull Market
The bull market in the U.S. stock market has been far from impressive, even if we assume it ended recently. When comparing the average gain of the nine bull markets in the Ned Davis calendar that lasted less than a year (55.7%) to the Dow's gain up until its August 1 peak, we see that the former more than doubles the latter.
Some may argue that bull markets that take longer to gain momentum tend to last longer as well, unlike those that quickly ignite and then fizzle out. However, there is only limited statistical evidence to support this theory.
For instance, let's consider the 50% of bull markets since 1900 with the smallest first-year returns. On average, these bull markets lasted about 2.3 years, compared to just two years for the 50% of bull markets with the biggest first-year gains. However, this difference lacks significance at the commonly used 95% confidence level, which statisticians rely on to determine the genuineness of a pattern. The same conclusion applies when examining the correlation between a bull market's first-year gain and its eventual return until its end.
In conclusion, regardless of how we analyze the data, it is clear that the U.S. stock market has been remarkably weak. Furthermore, it remains uncertain whether the bull market that began a year ago is still ongoing.
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