The S&P 500 bear market is finally over. That's great news — but what does that mean for your portfolio?
Good things it turns out. The S&P 500, led by outperforming stocks in such times like Target, TJX and Tyler Technologies, always rallies in the year following the end of a bear market, says an Investor's Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith.
Each of these stocks jumped an average of 30% — or more — in just 12 months after the end of a bear market. Some did much better than that. And all topped the S&P 500 in each of those periods following the end of bear markets going all the way back to 1971.
This is exactly the kind of relief investors could use following the brutal 162 trading days it's taken to snuff out the last bear market. That's how long it's taken for the S&P 500 to rise 20% from the 2022 bear market low by June 9, says Ryan Detrick, strategist at Carson Group.
"Once stocks are greater than 20% off bear lows, did you know a year later stocks have never been lower?" he said.
Bear Markets Open Up Better Times For S&P 500 Investors
Bear markets are painful to live through. But they always pave the way for better returns for S&P 500 investors, Detrick says. And you don't have to wait long to make money.
The S&P 500 gained 28.2% on average in the 12 months after rising 20% from bear market lows, says Detrick based on the past six bear market recoveries. And get this: The S&P 500 never failed to be higher after a 20% rally from the lows. And it's been higher not just in the next 12 months, on average, but also the past six, three and one-month periods. It's bullish anyway you look at it.
Take for instance the short-lived and most recent 2020 bear market. The S&P 500 rallied 20% from that bear market's low by May 6, 2020. And the rally kicked off some amazing subsequent gains. The S&P 500 was 12.1% higher in just a month and rose 47.5% in the following 12 months, Detrick found.
But which S&P 500 stocks are tops when bear markets die?
Finding Top S&P 500 Stocks In New Bull Markets
Some S&P 500 stocks are definitely standouts when bear markets finally die. Reliably so.
Retailer Target is a big-time favorite stock in new bull markets. Shares of the company topped the S&P 500 in each year following the past five times the market rallied 20% from a bear-market low. And Target stock gained a powerful 104.5% on average in those time periods. That's more than any other S&P 500 stock.
A rally in Target would be welcome as the company's stock is disconnected from its surprisingly bullish fundamental expectations. Shares are down 14.1% this year even though analysts think the company's profit will rise more than 38% this fiscal year and another 23.7% in the following fiscal year. Discount retailer TJX is another retailer whose shares aren't doing much this year, but beat the market when bear markets end.
Not all bull-leading stocks are limping this year, though. Tyler Technologies, a firm that offers computing services to the public sector, has seen its shares leap more than 20% already this year. But it's also a stock that tends to keep performing well even after the S&P 500 surges 20% from the lows. Like Target, it's outperformed the S&P 50o following each of the past five times bear markets ended. And it's rocketed nearly 80%, on average, in the 12 months after that happened.
So don't take too long celebrating the 20% rally from bear market lows. It's time to make money on S&P 500 stocks again.
These Stocks Thrive When Bear Markets Die
All outperformed the S&P 500 following a 20% rally from the past five bear-market lows
| Company | Ticker | Avg. first 12-month gains in past five new bulls | Sector |
|---|---|---|---|
| Target | 104.5% | Consumer Staples | |
| TJX Companies | 81.1 | Consumer Discretionary | |
| Tyler Technologies | 79.7 | Information Technology | |
| Host Hotels & Resorts | 79.7 | Real Estate | |
| Ford Motor | 62.8 | Consumer Discretionary | |
| Masco | 60.7 | Industrials | |
| J.M. Smucker | 58.4 | Consumer Staples | |
| HP | 54.2 | Information Technology | |
| PPG Industries | 52.1 | Materials | |
| Textron | 46.1 | Industrials | |
| DuPont de Nemours | 44.4 | Materials | |
| Revvity | 35.2 | Health Care | |
| Eaton | 31.4 | Industrials |
Sources: IBD, S&P Global Market Intelligence
Follow Matt Krantz on Twitter @mattkrantz
