Stocktake: Bull market passes duck test

Some bears on Wall Street continue to insist the market advance over the last 10 months is no more than a bear market rally. Are the bears in denial?

Sceptics argue bear market rallies can be strong and note the S&P 500 remains some distance below January 2022′s all-time high. Still, it’s getting closer, with the index now just 5 per cent below those aforementioned highs.

Additionally, market action increasingly looks like typical bull market behaviour.

Globally the number of international markets hitting new 52-week highs recently hit its highest level since August 2021, notes Hi Mount Research’s Willie Delwiche. In the US the Dow Jones Industrial Average closed higher last Wednesday for the eighth consecutive day. Such winning streaks tend to happen in bull markets, says the Carson Group’s Ryan Detrick, who notes there have been 18 such instances since 1990. A year later stocks were higher on all but one occasion.

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Similarly, says Detrick, the S&P 500 is on course for its fifth consecutive monthly gain. Detrick found 28 previous five-month winning streaks. A year later stocks were higher on 26 occasions.

Perhaps most importantly, the S&P 500′s near 30 per cent rally off October 2022′s lows mean it has now regained almost three-quarters of the ground it lost last year, says Fidelity’s Jurrien Timmer. Yes, you can get massive rallies during bear markets, but they generally don’t retrace more than half the decline, says Timmer. The argument that this is a mere bear market rally is getting harder and harder to maintain. If it looks, swims and quacks like a duck, then it probably is a duck. It’s a bull market.