It may be hard to believe, but the current bull market just turned 3 years old. This long-term rally began back on October 12, 2022. You’ll recall 2022….It was a nasty one and hard to forget. The fed was raising rates at a rapid pace to combat inflation which had spiked to 9% following all of the chaos caused by COVID. The market fell 25% that year and a lot of the biggest stocks in the world dropped much further than that. It was ugly. It was frustrating.
But…As that was going on I was showing you a lot of data and charts that taught us the market usually went on to produce very strong returns following big drops like we saw in 2022 so it was important we remain invested. Now, 3 years later, we’ve not only recovered that 25% but gone on to create new stock market highs and, consequently, new wealth for investors who stayed the course and stayed invested.
But you may be wondering….Can the market really continue going higher or are we out of gas? Well, truthfully, it’s impossible to know for sure. Anyone who claims to know with certainty what comes next for the stock market is full of hot air. But what we can do is look at historical analogs to get an idea of what usually has happened next. Take a look atTHIS CHARTwhich shows us all of the multi-year bull markets since 1950.What we see here at the bottom is that the average length of a bull market has been 5.5 years and the average total return has been 192%. Where do we stand today? 3 years and 89%. Now that’s not to say this current bull market will certainly last another 2-3 years and produce another 100% worth of returns….I’m simply showing you that this bull market is actually still relatively young when compared to past bull markets. Can we continue higher? Yes. Will we? We will have to wait and find out.
What we do know for certain is that a correction or bear market will eventually come and disrupt this bull market, and it will be important not to overreact. The news, your neighbors, heck maybe even some of your friends and family will probably be telling you to cut bait and bury your money in the back yard because this is the BIG ONE. But if we take anything at all from all of the data I’ve shared with you over the years, it’s this:
Pullbacks in the stock market have always proven temporary and 100% of them have eventually given ways to a new bull market that rallies to new heights and creates new wealth. It’s not being invested during a temporary downturn that hurts our returns. It’s selling during a downturn and not being invested when the market begins to rally that causes long-term damage to our portfolios.
Now I’ve got one more chart I want to show you and this one pertains specifically to the previous 6 months which have seen an incredible 35% rally from the April lows. This is only the 6thtime in the past 75 years that we’ve seen a 35% rally in 6 months or less. So what has happened over the next year following the previous 5 instances? Take a look atTHIS CHART and we see that the market has been higher 1 year later all 5 times by an average of 13.4%. Not bad. Not bad at all.
Thank you for reading!
NZ