The Bull Market Is About To Turn One
“The stock market is a giant distraction to the business of investing.” Jack Bogle, founder of Vanguard
First off, we hope everyone has a happy and safe Saint Patrick’s Day! We’ve had a lot of green out there over the past year and here’s to some more today and over the rest of 2021.
One year ago yesterday was one of the worst days in the history of the stock market, with the Dow losing 12.9%, the fourth worst day ever. In fact, only the ’29 crash, the ’87 crash, and the day after trading starting (after being halted for multiple months) in the midst of World War I in December 1915 were worse.
As the great Jack Bogle explained above, sometimes stock market volatility distracts us from our long-term goals. Many investors panicked and sold this time a year ago, only to see stocks soar higher, while bonds struggled and cash didn’t do anything. One of the most important takeaways from 2020 for long-term investors: it is important to have a plan in place before the skies turn dark.
As this current bull market nears the one-year anniversary of the March 23, 2020 lows, there will be a lot of reflection on how far we’ve come and where we could be going. The bottom line is the economy is recovering at a record pace, stocks are at all-time highs, and we’ll have the NCAA Tournament this year. Those are three things to be very grateful for.
So what happens now is the logical question? “The good news is previous bull markets have never been lower during the second year of their existence,” explained LPL Chief Market Strategist Ryan Detrick. “Although it won’t be an easy ride, investors need to remember that history is on the bulls’ side, as this bull market is still just an infant and continued gains are quite likely.”
As shown in the chart below, the previous six bull markets since World War II all saw gains during their second year. The average bull market was up 43% one year in and up to 61% two years off the lows. It is worth noting that the current bull market is up close to 75%, making it the strongest start to a new bull market ever, besting the start to the 2009 bull market. But be aware, that bull was up 68% one year off the lows, but up 94% two years off the lows. In other words, strong gains continued (the green line below).
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All index and market data from FactSet and MarketWatch.
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