Thursday’s inflation report sent the markets into a tizzy as traders returned to buying on hopes that the path is now clear for the Fed to reverse its rate hikes. Everyone is now wondering if the market has bottomed out following the extended slide that began at the beginning of the year.
What Happened: If history is anything to go by, there is a possibility of the stock market returning to its all-highs in a matter of three months, a graphic shared by Carson Group chief market strategist Ryan Detrick showed.
The current bear market seen from January 22 to October 22 has seen a drop of 25%, and the previous bear market closest to this in terms of the magnitude of pullback is in the 1980s. The S&P 500 Index retreated about 27% then, over a period of nearly two years. Once it became clear inflation had peaked, the market made new highs in three months, Detrick noted.
The early 1980s had a 27% bear market that lasted 21 months.
— Ryan Detrick, CMT (@RyanDetrick) November 10, 2022
Once it became clear inflation had peaked, it made new highs in three months. pic.twitter.com/03ixJoJOFh
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Huge Upside In The Offing? The Carson Group analyst said Oct. 12 could have marked the end of the current market. Previous post-bear market performances show an average gain of 41% for the S&P 500 Index a year later and a 59% return in two years. Even with Thursday’s rally, the index is only 10% off its lows, suggesting scope for a strong upside from current levels.
Was October 12, 2022 the end to this bear market? We think so, but of course no one really knows.
— Ryan Detrick, CMT (@RyanDetrick) November 10, 2022
If it was though, looking at other bears showed that stocks gain 41% a year later and 58% two years later.
Currently 10% off the lows... pic.twitter.com/ikjWI1EDLA
The optimistic picture painted by the analyst, however, is contingent on how inflation behaves in the coming months and how the Fed reacts to the data.
Price Action: The SPDR S&P 500 ETF Trust (NYSE:SPY) closed Thursday’s session 5.50% higher at $394.69, according to Benzinga Pro data.
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