Heard on the Street / Financial Analysis and Commentary
Stock Market Runs With Aging Bulls</br></br>What might be the sequel to the surprise summer hit: The Incredible Rising Stock Market?</br></br>At 1005.65, the Standard & Poor's 500-stock index is nearly 50% above its March low. The potency of the surge caught just about everyone off-guard. Yet the rally shouldn't be that surprising, as stock markets nearly always rebound when investors see an end to a recession. The big question is what happens after that initial surge.</br></br>Excluding the current downturn, there have been seven recessions since 1960. In the 12 months from the midpoints of those contractions, the S&P 500 rose a solid 17% on average. But in the following 12-month period, gains were harder to come by, with the S&P 500 adding only an extra 4% on average.</br></br>What does this history tell us? If the recession ended in June -- and most economists predict gross domestic product will grow in the third quarter -- the midpoint of this downturn would be September last year. In the 10 months since then, the S&P 500 is actually down by around 14%. So it wouldn't be surprising if the market rallied further from here. And with the Federal Reserve still intervening heavily to hold down borrowing costs and the government spending money hand over fist, few want to bet against this bull run.