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Bull Market Year 2—What Happens Next

The S&P 500 Index1 advanced 76% in the first year of the new bull market (S&P 500 data St. Louis Federal Reserve). We’re now in year 2.

How have bull markets performed in the second year? Reviewing the last 10 bull markets dating back to 1957, the S&P 500 Index has averaged a 13% advance in the second year (LPL Research).

But it’s not been without drama. The average peak-to-trough pullback during year 2 has averaged 10%. 

Through May 24, 2021, about 2 months into year 2, the S&P 500 is up almost 7%.

It would suggest, historically speaking, that gains through the rest of the year may be modest, though let’s not dismiss the possibility of volatility.

Investor’s corner

The historical data is used for illustrative purposes only. We know that past performance is not a guarantee of future results.

That’s a fancy way of saying stocks could under or over perform in year two. We believe much will depend on the economic fundamentals.

More importantly, we take a much longer-term view than simply one year. Diversified portfolios help reduce risk and volatility, but we can’t discount down years.

However, an evidenced-based approach helps put you on the path to your longer-term goals. Evidenced-based investing is rooted in decades of observations. It’s not simply guess-work or the “flavor of the month.”

If you have a well-diversified financial plan that has you on a path toward your financial goals, we congratulate you. You have chosen the less-traveled path.

@LWMLLC