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Why the launch of the S&P 500 is probably just beginning



It has been a year since the pandemic blinded the United States for the first time, turning many jobs, forms of education and ways of socializing into events at home.

But it’s only been about 11 months since the new bull market for the S&P 500 began.

This is one of the two main reasons why Truist Wealth analysts see the S&P 500 SPX index rising steadily.
-1.31%
there is still room to run.

This chart shows that the current bullish market movement of the S&P 500 may be both short-lived and too limited in terms of price increases to end soon, at least if the last six decades of operation are applied during a pandemic.

Today’s bull market S&P 500 is too short, scarce in the return department.

Truist Wealth

The bars show that the average S&P 500 bull market since 1957, when the benchmark was first introduced, has led to a 179% price increase and that the good times have lasted an average of 5.8 years, which is comparable to today’s returns. of 76% for the benchmark in less than a year.

US stocks began sinking in correctional territory about 12 months ago after the coronavirus pandemic first disrupted global travel and trade, a rocky period followed by key US stock benchmarks that pulled fresh lows at the end. in March.

But after quickly recovering from losses in 2020, stocks have continued to break a number of all-time highs this year, thanks in part to trillions of dollars in tax and monetary stimulus spilling over the economy as politicians seek to strengthen households severely affected by the crisis, and to maintain confidence and liquidity at a high level on Wall Street.

More recently, these same forces have raised concerns that the good times, after COVID, may already be fully baked into stock and other financial asset prices, and that high stocks and riskier parts of the debt market could lead to problems if inflation on the run stay or borrowing costs for companies and consumers become too high.

S&P 500, Dow Jones Industrial Average DJIA,
-0.39%
and Nasdaq Composite Index COMP,
-2.70%
were affected by volatile stains last week as the 10-year-old treasury TMUBMUSD10Y,
1,484%
yields jumped again on Wednesday, when the yield on the reference bond was seen about 1% higher than a year earlier or nearly 1.47%.

All three major stock indexes closed lower on Wednesday for the second day in a row as bond yields rose and technology stocks were again under pressure from sales.

Connected: Cathie Wood’s high ARK ETF has just entered the bear market – a sign of the times?

So how does today’s low-speed climb compare to the 50’s?

Truist analysts also have a chart showing that the profitability of the S&P 500 and the 10-year-old treasure increased together in the 1950s.

Shares, bond yields rise together.

Trust

“Although there are many differences between the 1950s and today, there were some similarities, such as very high levels of US debt as a result of the war, a Fed activist and a post-war economic boom,” wrote Keith Lerner, chief market strategist at Truist. in a note from Wednesday. “Interest rates rose from 1.5% at the beginning of the decade to nearly 5% at the end. Over the decade, despite two recessions, the S&P 500 rose 257% based on price and 487% based on total returns. “

This time, the Federal Reserve also repeatedly promised to avoid tightening monetary conditions, while keeping interest rates almost zero and the $ 120 billion a month bond-buying program open until the economy fully recovered from the pandemic.

Yield-hungry bond investors also welcomed the rush among high-rated companies to borrow this week, amid prospects for higher borrowing costs.

Look: Companies vie to borrow after last week’s extreme interest rates came to a head


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