After a 70% Run, What's Next for the Market?

January 29, 2021

So we've seen this new bull market rally by more than 70% from the bottom of the COVID Crash last March, which has been great!  But it begs the question, what might be next?  Obviously I don't have a crystal ball but I do have some historical parallels worth taking a look at that could give us an idea of what we might expect....

I've posted a picture below which charts the current bull market alongside two other bull markets that began very similarly in terms of strength and velocity.  The bull market starting in August of 1982, and the bull market which began immediately following the Financial Crisis in March of 2009.  

You can see the the current bull market (bold blue line) so far has tracked pretty closely to those previous two markets over the first 9 months or so.  But it's what happened next that is important for this conversation.  After the big runups early on, the 1982 bull and the 2009 bull both took a bit of a breather and chopped along sideways for the next several months starting right around this point in time.  Might history repeat itself?  It's impossible to know for sure, but I do feel a period of consolidation similar to the 1982 and 2009 markets could be a welcome and healthy sight.

As I've been stating repeatedly in the last couple of video updates I've done (posted HERE) investors we should expect the market to correct or consolidate after such a strong and mostly unencumbered rally.  This is not only completely normal, but it is also very healthy.  We don't want the market to just climb continuously higher without pause because it could set us up for a larger correction later on.   

Simply put: Periodic price corrections can keep markets from becoming overheated and can extend the life of a bull market.  We should not fear corrections.  We should expect them and understand the important role they play in our longer term success. 

So, if this bull market is due for a respite similar to the markets in 1982 and 2009, that should come as no surprise and should not be cause for panic.

So what followed the periods of consolidation in the previous bull markets illustrated above?  Several years of additional gains.   

S&P 500 Returns:

1983 - 22.6%

1984 - 6.3%

1985 - 31.7%

1986 - 18.7%

2010: 15.1%

2011: 2.1%

2012: 16%

2013: 32.4%

As you can see....the breather the market took during the previous bull markets most similar to this one led to several years of further gains.  Stay committed to your long-term plan.

Need help formulating your long-term plan?  Contact us.

This is meant for educational purposes only. It should not be considered investment advice, nor does it constitute a recommendation to take a particular course of action. Please consult with a financial professional regarding your personal situation prior to making any financial related decisions. The S&P 500 index is unmanaged and you cannot directly invest into an index. Past performance is not a guarantee of future  results.