If past performance is any indication, the surge that has propelled the US stock market to all-time highs this week might still have room to grow. May’s inflation concerns were allayed by new indications of a slowing economy, which enabled all three of the major US stock indexes to reach record highs this week. The benchmark S&P 500 is up 11% so far this year, having dropped more than 4% in April.
According to market strategists who study past trends, stocks often gain momentum after comparable-sized pullbacks and frequently keep rising even after regaining lost ground.
If the current bounce follows that pattern, more gains might be in store. According to co-chief economist Keith Lerner, previous S&P 500 recoveries from 5% declines have been followed by a median increase of 17.4%. said Keith Lerner, co-chief investment officer at Truist Advisory Services. As of Friday, the index was up nearly 7% from its April lows.
Broader historical comparisons also suggest more upside for the current bull market. According to Lerner’s research, bull markets have increased by a median of 108% since the 1950s, while the S&P 500 has risen by roughly 50% since October 2022.
According to Lerner’s data, the median duration of a bull market during that period was slightly longer than 4.5 years, while the current one has been in place for slightly longer than 1.5 years.
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