The current bull market will be studied for years to come…
Historically, bull markets run much longer than bear markets.
Going back to 1950, the average bull market in the S&P 500 runs 5½ years, with the longest being 12 years that started in the late 80s. That incredible run resulted in a 582% gain before it all came crashing down when the dot-com bubble burst in 2000.
Here we are in 2024, in the midst of another bull market run that has already lasted more than two years. And it feels a lot like that tech-driven stampede from 25 years ago…
Since its start in October 2022, the S&P 500 has jumped more than 62%, while the Nasdaq Composite Index has charged ahead 76%.
What if I told you that the bull market may still run, but those massive returns we’ve come to expect will slow down significantly?
Let me explain…
The Days of Huge Index Gains May Be Over
Over the last 10 years, the S&P 500 has posted an annualized nominal total return of 13%.
The longer-term average return is closer to 11%.
With this year’s strong performance, the S&P 500 is on track to outperform the rest of the world for the eighth time in the last 10 years.
And as we’ve mentioned in Money & Markets Daily before, Big Tech stocks carried the broader index until just a few months ago.
Gains by stocks like Nvidia Corp. (Nasdaq: NVDA) — up 1,119% since October 2022 — and Meta Platforms (Nasdaq: META) — up 344% — have been the primary catalyst for the market rise.
But Big Tech stocks are starting to fall in line with the rest of the market — or even lag it. Alphabet Inc. (Nasdaq: GOOGL) is up a little more than 5% over the last six months, while the S&P 500 has gained more than 16%. And that’s just one example.
This is actually good news for the bull market’s future. It points to a healthier rally that should benefit more than just a handful of stocks.
Those huge annualized index returns will start to slow down, but that’s OK. Because we’re starting to see a shift…
Since the July CPI print signaled the Federal Reserve’s start of its latest interest rate-cutting cycle, investors have started looking for opportunities outside of Big Tech.
It’s subtle, but check out this chart:
The S&P 500 equal-weighted index is up 6.4% over the last three months, compared to the 5.4% rise in the market-cap weighted index. That means that more stocks are participating in the ongoing bull market now.
What It Means for the Market … and You
As I mentioned earlier, none of this is bad news.
Broadening out the market’s returns virtually ensures that we’ll continue to see this bull market run higher in the immediate future.
In fact, the broader the market returns, the more sustainable a bull market rally is. It can maintain momentum, even if some larger stocks falter.
If you consolidate gains to five or 10 stocks, any sudden headwind pushes the whole market south.
However, it does mean that the Big Tech stocks that initially fueled this rally may not be as certain as they were at the beginning of the bull market.
Neither are traditional index funds, considering there is a strong possibility that annualized returns will slow down.
What this all boils down to is that it is more important than ever to have a diversified strategy that doesn’t solely focus on one sector of the market or the broader market in general.
And we can help with that.
Adam just put together a special report containing three stocks that he believes have everything it takes to outpace this ongoing bull market. Click here to find out how you can access that report now.
That’s all I have for today. Until next time…
Safe trading,
Matt Clark, CMSA®
Chief Research Analyst, Money & Markets