Jun 6, 2023 - Economy

How we’ll know stocks have entered a new bull market

Illustration of a bull leaning ever so slightly into the image.

Illustration: Aïda Amer/Axios

The rally in stocks has some saying the bear market is nearly over. But we won't know for a while if that's right.

Why it matters: Nobody knows if we're in a new bull market, but the mere fact that we're talking about it underscores the momentum stocks seem to be gathering.

The latest: The S&P 500 is flirting with a 20% gain from the depths of the bear market. That drop entailed a peak-to-trough tumble of 25%.

  • The 20% rebound, some say, indicates the end of the gnarly bear market that began in early January 2022.

Be smart: Bull markets and bear markets are basically the term of art applied to periods when stocks are either largely going up (bull) or down (bear).

  • When and where they start and end are determined by a couple of highly unscientific rules of thumb, that are basically a form of market folklore.

How it works: The start of a bear market is easy to recognize, traditionally speaking. When stocks fall 20% from a high, you're in a bear market.

Yes, but: Pinpointing the precise birthday of a bull market, on the other hand, is only possible in retrospect.

  • It's not sufficient simply to have a 20% rise from a recent bottom.
  • Because of the way percentages work, that would still leave you 5% below the market's previous high, which isn't a particularly bullish spot.
  • That's why, most market watchers say, the market has to hit a new high, before we can confirm the current market qualifies as a bull.
  • The S&P 500 is currently about 10% below that level.

The bottom line: As we've said a lot recently, the market seems to be in surprisingly good shape. And we might even be in a new bull market. But we're waiting for that new high before we break out the Champagne.

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