In this birthday edition of Glass Half Full, Ryan Detrick, Chief Market Strategist at Carson Group, and Sonu Varghese, Chief Macro Strategist at Carson Group, celebrate the fourth anniversary of the bull market that began after the 2022 bear market and ask: Can it make it to year five?
The S&P 500 is up roughly 131% on a total return basis since the October 2022 low, with the index recently hitting a record high. Sonu breaks down where those gains came from: Of the 131%, about 13 percentage points came from dividends, 85 from profit growth, and only 33 from multiple expansion. Within profit growth, sales growth contributed about 45 percentage points and margin expansion about 40, which is more than valuation expansion added. Ryan notes that margins were widely expected to fall, yet higher profits and higher margins have been the dual tailwinds all along.
They also put the milestone in historical context. Five prior bull markets over the past 50 years made it to this point, and each one lasted at least five years, averaging about eight years. This rally is the third best start of the group, and in the two that started stronger, year five brought gains of roughly 21% to 30%.
Ryan likens a bull market to a cruise ship that is hard to slow down once it gets moving, and the S&P 500 is up almost 20% on a total return basis over the past year. Sonu adds that bull markets don’t die of old age, and that the Fed is the usual suspect. Even with inflation running hot, he doesn’t see the central bank anywhere close to raising rates to the level that would kill this bull. They close with plenty of chocolate cake and a homework assignment: Go celebrate.
Key Takeaways
- Earnings, not hype, drove this bull market. Of the S&P 500’s roughly 131% total return, about 85 percentage points came from profit growth, 33 from multiple expansion, and 13 from dividends, and margin expansion alone added about 40 points, more than valuations did.
- History favors year five. Every one of the five prior bull markets that reached this point went on to at least a fifth year, averaging about eight years, and the two that started stronger than this one gained roughly 21% to 30% in year five.
- Bull markets don’t die of old age. Something has to end them, and the usual culprit is the Fed. Even with inflation running hot, we don’t see policymakers anywhere close to raising rates to a level, such as 7%, that would break this rally.
- We remain optimistic on stocks. With the S&P 500 at a record high and up almost 20% over the past year, we think the bull market is like a cruise ship that is hard to stop, and we expect it will likely still be going a year from now, though there are no guarantees.
Jump to:
0:00 – A Bull Market Turns Four
1:50 – Where Returns Really Came From
4:10 – History Says Year Five Can Rise
6:25 – What Could Actually Kill The Bull
7:45 – Cake Talk And Closing Takeaways
Connect with Ryan:
- LinkedIn: Ryan Detrick
- X: @ryandetrick
Connect with Sonu:
- LinkedIn: Sonu Varghese
- X: @sonusvarghese
The views stated in this podcast are not necessarily the opinion of Cetera Wealth Services, LLC, or CWM, LLC. and should not be construed directly or indirectly as an offer to buy or sell any securities mentioned herein. Due to volatility within the markets mentioned, opinions are subject to change without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. Past performance does not guarantee future results.
Ryan Detrick and Sonu Varghese are non-registered associates of Cetera Wealth Services LLC.
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