Despite pervasive skepticism based on: Russian invasion. China US tension. Inflation. Rising rates. Bank collapses. Default fears. The S&P 500 has been climbing generally for 9 months. Axios describes this year’s market as “climbing a wall of worry.”

A strong June of 6.6% return propelled the index to 26% over its October low, which qualifies the advance as a new bull market.

We’ll coin it The Great Normalization (TGN) Bull … the seventh bull market for S&P 500 since Vietnam War circa 1968 and tenth since The Great Depression circa 1930.

Granted. Value has lagged. But growth has soared. NASDAQ up nearly 40%. Berkshire Hathaway BRKA is up 27%. So is Japan (Nikkei). Rest of the world (ACIXUS) up 25%.

TGN Bear lasted just 9 months, inflicting drawdown pain of -24% through last September.

The table below summarizes full cycle performance since 1929:

The underwhelming full cycle returns may help explain the lack of enthusiasm for the new bull market. We remain 4% shy of getting back above water. But if history repeats, once the S&P climbs more than 20% above recent lows, it goes on to new all-time highs … may take a while, but it’s been happening for 100 years.

The table below provides a breakout of the bear and bull market components of the same cycles: 

A 8 June WSJ article mentions: “U.S. stocks rose Thursday, ending the S&P 500’s longest bear market since the 1940s and marking the start of a new bull run.”

That description had me a bit perplexed, along with a couple other long-time members of MFO Discussion Board.

I believe this declaration works if what’s being measured is the time between the minimum level of bear market (trough … greatest drawdown from previous peak) to time it takes to grow 20% from that minimum.

Using month ending (not daily) returns, it took 9 months … from October 2022 to June 2023 to accomplish. With the Tech Bubble, it took slightly less at 8 months. With Post WWII cycle in 1940’s, it took 23 months. (See Min-To-Bull in above table.)

So, interesting, but not really indicative of pain we all feel during a bear market. For example, in 1930’s it only took 2 months for S&P to gain 20% over its abyss of -83% in May 1932 … but the bear market, measured from last peak to trough took 33 months … and then another 151 months or 12.5 years to get back above water.

Certainly not how we measure length of bear market, which is the time from previous peak to trough.

Perhaps a better definition would be time the market enters bear territory (down 20% from previous peak) to time it climbs 20% above trough. (See Bear-To-Bull in above table.)

In any case, the bull and bear cycle declarations are only known in retrospect, ex post.

They become more credible historical markers if each cycle results in a new all-time high. We need another June-like gain for that to happen with the current cycle.

Fingers-crossed!

For reference, our series on market cycles for US equities, which includes methodology, is summarized here:

• The Great Normalization [July 2022]
• Early Cycle Metrics [December 2021]
• Super Bull Markets [November 2021]
• A Thirty Year Proposition [September 2020]
• A Presumptive Bear Ends an 11-Year Bull Run [April 2020]
• Mediocrity and Frustration [November 2014]
• Ten Market Cycles [March 2014]

Updated MFO Ratings through June are crunching currently and should post to MFO Premium site on Sunday, 2 July.

Finally, please join us on Tuesday, 11 July for an MFO Premium Mid-Year Review webinar. Register here.