Bull market remains intact

Stocktake: September was difficult for stocks but investors cannot complain

Wall Street, New York. The S&P 500 remains well above its 200-day moving average. Photograph: iStock

Wall Street, New York. The S&P 500 remains well above its 200-day moving average. Photograph: iStock

 

The market headlines have been grim lately, but the bull market still looks strong.

The S&P 500, for example, remains well above its 200-day moving average. Indeed, it’s been above that much-watched level for 320 trading days. An unsustainable level of strength? Not necessarily – data from LPL Research strategist Ryan Detrick shows markets have posted longer runs in many prior bull markets.

That said, 2021 has been unnaturally easy in many respects. The recent declines meant that for the first time time in 10 months, fewer than three out of every four S&P 500 stocks closed above their 200-day moving average – the fourth-longest streak since 1928, according to Sundial Capital Research.

Investors had become used to a “historic level of calm”, says Sundial, a point echoed by Ritholtz Wealth Management’s Michael Batnick. Last Monday’s bloodletting was the first time the S&P 500 fell over 2 per cent in a day since May, notes Batnick, while the index has been within 5 per cent of its all-time high for over 220 days – the eighth-longest streak since 1950.

September lived up to its reputation as a difficult month for stocks, but investors cannot complain. “It feels worse than it is,” says Batnick, “because things have been so calm for so long.”

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