Stock Market’s Record-Setting Rebound: Potential for Further Upside

36

The recent record-setting rebound in the U.S. stock market has sparked optimism among investors, with historical data suggesting that the rally may have more room to run. As signs of a cooling economy ease inflation concerns, all three major U.S. stock indexes have surged to new highs this week, marking a significant turnaround from April’s downturn.

Market analysts and strategists, drawing insights from historical trends, point out that stocks often gain momentum following sizable pullbacks, continuing to climb even after recovering lost ground. In the case of the S&P 500, which experienced a more than 4% decline in April but has since rebounded over 11% year-to-date, historical data indicates a potential for further gains.

Moreover, broader historical comparisons also support the notion of additional upside for the current bull market. Lerner’s analysis reveals that since the 1950s, bull markets have seen a median climb of 108%, significantly higher than the roughly 50% gain observed in the S&P 500 since October 2022. Additionally, while the median length of a bull market historically exceeds 4.5 years, the current bull market has lasted just over 1.5 years, indicating the potential for further duration and growth.

Overall, the combination of favorable economic conditions, reduced inflation concerns, and historical precedents suggests that the current stock market rally may still have room to flourish, potentially offering further gains for investors in the coming months.