One year ago this week, the stock market bottomed out. But since then investors have ridden a giant wave of vaccine progress, epic fiscal stimulus and unprecedented support from the Federal Reserve as trillions of dollars were spent to thwart a pandemic Depression.
The S&P 500 has surged a stunning 76.1% from that Covid crash last spring — and history shows the hotter a bull market starts, the longer it typically lasts.
There are no guarantees, CFRA Research’s chief investment strategist Sam Stovall wrote in a note Wednesday, but “an above-average first-year gain has typically translated into a longer-duration bull market, whereas tepid first-year gains usually led to below-average durations.”
And this first-year bull gain is well above average. In fact, it’s more than double the average 37.5% for previous bull markets and the highest gain since 1945, according to Stovall. It’s also a good clip above the 2009 bull’s 68.6% first-year jump. So this runup could last quite a while.
Never before has the adage “Wall Street is not Main Street” been more true.
Sure, a Depression was averted, but the US is still in the midst of the pandemic. And the suffering has been unprecedented, even as the Dow set new record highs dozens of times and has topped 33,000, and the Nasdaq, though under pressure recently, is still up almost 75% from its 2020 low as well.
The coronavirus pandemic has killed more than 530,000 Americans. Millions of US schoolchildren have not set foot in a classroom in a year. Hospital workers are burned out. The job market was gutted as the virus shut down travel, leisure, eating out, movies and so much more. Today, 18.9 million people are receiving jobless benefits, either through traditional state jobless claims or pandemic programs. Millions of jobs have come back, but the economy is still down 9.5 million jobs since the pandemic began.
In fact, the stock market is so far ahead of the Main Street cycle that it’s looking ahead to a new phase: fretting about how strong the eventual economic boom will be. The 10-year Treasury yield, still low by historic standards, recently rose to the highest in 13 months and is sparking inflation fears. Meanwhile the high-growth and technology stocks that led the 2020 rebound have lagged, as economically sensitive blue chips are outperforming.
Hopefully, Main Street is on the verge of turning the page, too. There are bits of bright spots in economic data, like the Labor Department reporting jobless claims at the lowest level of the pandemic. Yet they’re still higher than the peak of the Great Recession.
These days it seems like the good news on Main Street is often bittersweet. But for Wall Street, the sweet run might be just beginning.
