Uncategorized, Weekly Update

A New Bull Market

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Published September 22, 2017


While many in the industry speculate on the coming end to a years-long bull market, there are others who argue that the bull market has just begun. How does this disagreement come about? For those defining a bear market as a -20% decline in stock prices, and focusing on the S&P 500, you must go back to August/September of 2011 to get a decline of that magnitude. Even then, the decline was so swift, with the recovery equally swift, that many market watchers don’t really count that decline as being a full-fledged bear market. Those folks go back to the financial crisis and argue that a new bull market began in 2009. By that count, we are in one of the all-time longest stretches of bullishness.

Chart 1: S&P 500 recent history of declines

S&P 500 recent history of declines

Taking a look at our focus Nasdaq index, we see that the index has not experienced a -20% definitive bear market drop since the post-financial crisis recovery. However, there have been several declines of nearly -10% or greater. If you look on an intra-day basis, the decline in early 2016 came very close to a -20% reading.

Chart 2: Nasdaq 100

Nasdaq 100 recent history of declines

The more volatile small-cap Russell 2000 perhaps displays most clearly the bull and bear markets of the past few years.

Chart 3: Small-cap stocks have experienced major declines

Small-cap stocks have experienced major declines

The -27% decline ending in early 2016 is very clear on Chart 3 above. As a result of the declines in early 2016, some conclude that the subsequent recovery and full-on breakout this year heralds a fresh bull market. If so, this rally could go on for a while.

Market Update

Stocks had a very uneventful week sticking close to new high ground as hurricane-related news faded and the Federal Reserve’s meeting delivered nothing new. Indexes opened the week with a +0.1% move and again on Tuesday and Wednesday with transport stocks showing strongly Wednesday. Thursday saw markets give all of those gains back with market heavyweight Apple (AAPL) struggling all week as reports emerged that customers are lukewarm on the new iPhone 8. Friday brought a completely flat day.

The S&P 500 (SPY) held flat after the prior week’s breakout posting a +0.10% move on the week. The Nasdaq 100 (QQQ) reflected a touch of weakness in tech stocks slipping -0.97% while small-cap stocks (IWM) rose on strength in oil and financial shares to a +1.33% weekly rise. Small-cap stocks have rebounded fully from their July swoon to join large-cap indexes at new high ground.

Warm wishes and until next week.