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The S&P 500 just hit an all-time high. History shows what happens next.


This is officially a bull market: S&P 500 Index It closed at a record high on Friday, about two years after its last peak. Since the last bear market low on October 12, 2022, the broader market index has gained approximately 33%.

As the stock market reaches uncharted territory, it’s natural to wonder what new records will mean for the stock market. Is now a good time to enter the market, or is there an opportunity to pull back?

Let’s see what the records show.

Silhouette of a bull on the mountainside.

Image source: Getty Images.

S&P 500 Peaks and Troughs

Since 1950, the S&P 500 has had 11 bear market, which is defined as a decline of 20% or more from market peak to trough. The duration of these peak-to-trough declines ranged from just 33 days at the start of the coronavirus pandemic to nearly 2.5 years later. -com The bubble bursts.

However, what we want to know is what the typical duration is bull market The first post-bear market all-time high is followed by a period of time. Since 1950, this period has been as short as four months and has occurred twice. The first was in 1980, when the long rebound from the oil crisis lasted 10 years. From 1974 to 1980, there was the “Walker Recession,” in which Federal Reserve Chairman Paul Volcker raised interest rates to curb inflation, causing the stock market to crash. In 2007, the time from all-time highs to the next was equally brief, as the bull market following the dot-com bust hit the global financial crisis.

On the other hand, the longest period between a new all-time high and the next peak is from the post-Black Monday recovery (all-time high in July 1989) to the end of the dot chart. com boom began in March 2000 and lasted for nearly 11 years.

Since the 10 occurrences of this event since 1950, the average duration from an all-time high to the next peak has been 3.3 years.

Will it be different this time?

Based on this information, there doesn’t seem to be much of a historical pattern between all-time highs and how long a new bull market will last, as it ranges from as little as four months to nearly 11 years.

However, it is worth noting that the next bear market in history has been triggered by a new event or new economic cycle. 2007 was the financial crisis, 1980 was the Walker Recession, and 1973 was the U.S. recession. Oil crisis. Other triggers include the dot-com bust and the coronavirus pandemic.

This stock market cycle is different from the past in that most bear markets are accompanied by economic recessions. While many economists and CEOs predicted a recession in 2022 and 2023, that prediction has not materialized even as the benchmark federal funds rate jumped to over 5%. With the S&P 500 back at all-time highs, investors appear more confident than before that we will achieve a so-called “soft landing,” meaning the Fed will be able to reduce inflation to its target level of 2% without causing economic disruption. decline.

What it means for investors

While it can be useful to review historical lessons for the stock market, there are rarely simple answers or repeatable patterns, and history shows that new all-time highs do not guarantee a durable bull market, even though the average bull market is more than three years old.

The good news for investors right now is that there doesn’t appear to be a major threat to the economy, but that could change faster than you think. After all, most market disruptions begin with unseen threats.

However, investors are better off buying quality stocks and holding on to them for the long term rather than trying to time the market based on new milestones. With this strategy, you’ll benefit from the magic of compound interest and the S&P 500’s long track record of annual returns of 9% or more – from bull markets to bear markets and back again.

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Jeremy Bowman Has no position in any of the stocks mentioned. The Motley Fool has no position in any stocks mentioned. Motley Fool has disclosure policy.

The S&P 500 just hit an all-time high. History shows what happens next. Originally published by The Motley Fool



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