Stocks have rallied so sharply in the past few months that it prompts a question: Are we in a new bull market? With the S&P 500 index up 36% since its March 23 low through mid June, the answer seems an obvious yes. And yet, plenty of veteran Wall Streeters say the bull isn’t official yet, and we’ve seen some cracks in the rally.10 Things You Must Know About Bull Markets
Conventional wisdom says stocks are in a bull market once they’re up at least 20% from the market’s low. (A bear market is typically thought of as a 20% drop from the high.) But given that bear markets are often punctuated by powerful rallies that ultimately fade, it’s important to add a time element to a bull-market assessment. Sam Stovall, the chief investment strategist at investment research firm CFRA, defines a bull market as a gain of at least 20% plus a span of six months without the market undercutting its prior low.
Official or not, however, Stovall is a bull. CFRA’s 12-month target for the S&P 500 is 3435, 13% higher than its June 12 close. “I think the March 23 low will eventually be regarded as the start of the new bull market,” says Stovall. “The reason for my optimism is the massive amount of stimulus” injected into the market and the economy by the Federal Reserve and Congress. CFRA is most bullish on the communication services, health care and information technology sectors.
Doug Ramsey, chief investment officer and portfolio manager at the Leuthold Group, remains dubious. “The current rally is either the first up-leg of a new bull market or the second-largest bear-market rally in the past 125 years,” he says. On the one hand, you’ve got unprecedented monetary and fiscal stimulus. On the other hand, says Ramsey, price-earnings multiples at the market’s March low remained much higher than in other post-WWII market troughs, making it the priciest bear-market low in history—if it stands. “I still think there’s a chance we could break below those lows,” he says. “I’m trying to look at the glass as half-full, but how can we embark on a multiyear bull market when we’re at valuations that are so much higher than what they were at the same stage of the last bull market?”
A close above the 3386 level for the S&P 500, eclipsing its February high, would settle the question of bull-