Resurgence of the Bulls: The S&P 500 Marks End of Longest Bear Market Since 1940s

The curtain has finally fallen on the S&P 500’s longest bear market since the 1940s. On Thursday, the standard-bearer index triumphantly reclaimed its bull market status by closing up 0.6% at 4,294, a 20% surge from its low point in October. The revival of the S&P 500 can primarily be attributed to the impressive performance of several prominent entities, including Big Tech, Tesla (TSLA), and AI powerhouse, Nvidia (NVDA). This momentous shift has been further bolstered by a revival of economic optimism, marking a stark contrast to the gloomy outlook that dominated the market in 2022.

Dispelling the Shadows of Economic Fears

As we entered the year, the whispers of an impending recession were omnipresent. However, the predicted financial collapse has, thankfully, not yet materialized. Instead, we’re witnessing a gentle deceleration of the economy, a welcome departure from the worst-case scenarios. Despite the prevalent uncertainties, inflation remains significantly below its peak from last summer. Meanwhile, the job sector continues to deliver pleasant surprises. On the political front, the contentious issue of the debt ceiling has been temporarily shelved. Additionally, a promising shift toward a less stringent monetary policy is becoming apparent at the Federal Reserve.

A Glimpse into the Monetary Policy Landscape

This week, the Federal Reserve is observing a blackout period in the run-up to the FOMC meeting scheduled for June 13-14. Unexpected rate hikes by the central banks of Australia and Canada have instigated minor revisions. However, based on the CME FedWatch Tool, there is a strong 77% probability that the Fed will maintain the current rates in the forthcoming week. While rate hikes might reappear on the agenda in July, there is a prevailing sentiment that the FOMC is nearing the conclusion of its rate-raising trajectory.

Expert Insights on the Market Trends

Opinions among financial pundits are mixed. Mott Capital Management postulates that the recent bull run, which finally pushed the index above 4,200, could potentially be a false alarm. They warn that the stock market may have “made a big mistake.” Conversely, Investing Group Leader Lawrence Fuller proposes a more optimistic perspective. He suggests that while the largest technology firms have spearheaded the bull market so far, the breadth of participation is starting to expand. For context, the S&P 500 remained in bear market territory for an extended period of 248 trading days, marking the most protracted duration since the cycle that ended on May 15, 1948, which spanned 484 days.