Is the Bear Market Over? It Depends.
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The S&P 500, the index obsessed over by investors, executives, and government officials, on Monday came close to finishing 20 percent above its lowest level of 2022, a gain that some on Wall Street see as the start of a bull market and a new phase of investing exuberance.

The index fluctuated around the threshold on Monday, moving above it multiple times, before ending 0.2 percent lower for the day, which put it at 19.5 percent above its October low.

Still, the move underscores the strong recovery in the stock market since fears of high inflation, rising interest rates and a looming recession had steadily pushed the index down from its peak in early 2022. The S&P 500 fell into a bear market — which is defined as a decline of 20 percent or more from an index’s high — in June of that year and continued to slide until hitting a low in October.

The terms “bull” and “bear” are shorthand for excitement or fear among investors about the prospects for public companies. But while investors tend to agree on how to mark the start of a bear market, there’s less consensus on how to define the start of a bull market, especially when the concerns that initially dragged stocks lower still linger.

One rule of thumb is that a new bull market is confirmed when an index sets a new high after rising from a bear-market low. By that measure, the S&P 500 is still more than 10 percent short.

But some investors say it’s simpler to look at any gain of 20 percent or more in a broad-based index like the S&P 500 as an important milestone, with the measurement taken at the end of the trading day. More than $15 trillion in investment assets are benchmarked or indexed to the S&P 500, according to S&P Dow Jones Indices, which manages the index.

“We’re not in a horrible spot,” said James Masserio, co-head of equities for the Americas at Société Générale. “There are recession risks for sure, but we have to see how those materialize over several months and into next year. So technically this is a bull market.”

Still, a rise of 20 percent from a low is, mathematically, less substantial than a fall of 20 percent from a high. Other investors prefer an assessment that involves a wider look at investor sentiment, economic growth, and the market’s direction.

“If a stock goes from $10 to $5 and then rallies to $6, it’s not in a new bull market,” said Peter Boockvar, chief investment officer at Bleakley Financial Group. “Defining a bull or bear market, however it’s done, should be done via a broad look at the market.”

The recent rally in the S&P 500 has been led by a small group of tech stocks propelled by enthusiasm about the profit-generating possibilities of artificial intelligence, especially for those at the heart of its development and the production of hardware needed to power it. Nvidia, the chip maker, has come to symbolize this newfound enthusiasm for A.I. because its semiconductors are used in the technology. The company has rallied almost 170 percent this year — gains that have brought its valuation close to $1 trillion.

The average individual stock in the S&P 500 has risen less than 3 percent this year, market data through Friday’s close shows, compared with a gain of over 11 percent for the index as a whole. Some 90 percent of the index’s rise is due to bumper gains for just seven of the biggest companies: Amazon, Apple, Meta, Microsoft, Nvidia, Tesla and Alphabet, the parent company of Google.

Apple rose 2.2 percent by early afternoon on Monday, briefly marking a new high for the company, before sliding to end 0.8 percent lower, weighing on the index.

The S&P 500 also tracks only the largest companies listed in the United States. Smaller companies are generally more exposed to fluctuations in the U.S. economy because larger firms generate a sizable share of revenue overseas.

The Russell 2000 index, which tracks smaller public companies, has recently recorded more modest gains than its big-company counterpart. The index fell over 30 percent from its peak in November 2021 to its low last June. Since then, the index has risen about 9 percent. On Monday, the index fell 1.3 percent after weaker-than-expected economic data on the services sector.

In contrast, the Nasdaq Composite index, which is heavily weighted toward big tech companies, has risen more than 26 percent this year alone. Yet it remains almost 20 percent below its previous peak, hit in late 2021.

“I think the 20 percent rule has been an easy one for folks to follow,” said Sameer Samana, a senior global market strategist at Wells Fargo Investment Institute. “Unfortunately, some of these bear-market rallies are triggering that threshold, which we view as a false signal.”

For many investors, the bumper returns in the stock market haven’t been reflected in their portfolios’ performance. That’s because, with so much concern about a possible recession, fund managers are largely holding more cash and hedging their holdings against the risk of a precipitous fall, forgoing gains in favor of greater safety.

Just over 27 percent of funds tracked by Morningstar that are benchmarked to the S&P 500 are beating the index this year, compared with almost 52 percent last year and an average of 40 percent since 2000.

Hedge funds and other leveraged investors especially have built up big bets on the S&P 500 falling, according to data from the Commodity Futures Trading Commission.

“Everyone has been so defensive,” said Andrew Brenner, head of international fixed income at National Alliance Securities. “There is a lot of cash on the sidelines, and so this is actually quite painful for a lot of fund managers.”