A year ago, we called for the S&P 500 to reach new all-time highs in 2017 and suggested that US equities could experience the final melt-up rally that historically has characterized late-cycle bull markets.
This graph depicts the average performance (excluding dividends) for the S&P 500 in the final 500 trading days of a bull market and the first 250 sessions (one year) of the ensuing bear market.
The S&P 500 has returned an average of 48.35 percent in the final 500 days of a bull market—about 58 percent, if you include dividends—and roughly 25 percent in the final 12 months. Over the past 80 years, the S&P 500 has never experienced a bull market that didn’t involve at least a 21 percent rally over its final 500 trading days and a 10 percent gain in the final year.
On average, the S&P 500’s performance in the final 500 days of a bull market accounts for just over 40 percent of its full-cycle return.
The message is clear: Missing out on a bull market’s final melt-up cycle increases the likelihood that you will underperform over the long haul. Investors are better off paring their equity exposure a few months after the market tops than running the risk of bailing out too early and missing out on any late-cycle gains.
Our outlook for the S&P 500 proved to be correct last year, with the index’s 21.8 percent gain fitting the pattern of the melt-up rallies that usually occur in a bull market’s latter innings.
Wrong on Volatility
The S&P 500 may have reached new highs in 2017, but our call for a bumpier ride couldn’t have been more wrong: The S&P 500 hasn’t experienced a correction of more than 5 percent since summer 2016—the longest uninterrupted rally in its history.
Your complete guide to energy investing, from growth stocks to high-yielders.
In October 2012, renowned energy expert Elliott Gue launched the Energy & Income Advisor, a twice-monthly investment advisory that's dedicated to unearthing the most profitable opportunities in the sector, from growth stocks to high-yielding utilities, royalty trusts and master limited partnerships.
Elliott and Roger on Jul. 1, 2019
Balanced portfolios of energy stocks for aggressive and conservative investors.
Our take on more than 50 energy-related equities, from upstream to downstream and everything in between.
Our assessment of every energy-related master limited partnership.
Roger Conrad’s coverage of more than 70 dividend-paying energy names.