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