It seems pretty obvious that the market has performed very well following the big-time bear market drop a year ago. We’ve received many questions related to the market performance, such as ‘Is this normal?’, ‘Is it over?”, ‘How long will it last?’ and so on. To aid you with a general idea of what markets have done IN THE PAST following a bear market we’re including a graph.

Here’s the key: the blue line in the chart below shows the DOW index performance since the low in March of 2020. That’s an amazing line. The chart also shows a grey line which indicates what the ‘average’ post-major-bear-market rally has looked like since 1950. And for perspective we’re including- in orange- the rally after the March 2009 low.

So, in answer to “Is this normal?”, well, yes, it is. Although an average is just that, a mathematical average, you’ll note that during the first 500 days from the bottom, markets have on average been up some 60%. (Source here is ‘Chart of the day’.) The current rally is running ahead of the average rally returns since 1950, and also quite a bit ahead of the rally since the ‘big one’ in 2009.

Is it over/How long will it last? Since 1894 the average bull market has lasted 12 ½ years.  (Source Dorsey Wright/Nasdaq). Again, an average tells us very little, but historically it would be unusual to see a bull market rally end within a one-year period, so I’ll go out on a limb and say that, at least from a historical view, this rally still has a lot of room to run. Note that the lines are NOT straight lines, and all past rallies have had pullbacks and pauses along the way. So, we don’t know the future; let’s enjoy the rally as long as it lasts.

Ron’s Market Minute — A Reminder: You’re Listening to The Wall Street Waltz

There is a phrase that we like to repeat every now and then. It’s a familiar refrain in the world of finance and investing. The phrase is ‘The Wall Street Waltz’. Even if you’ve never heard of it, you might guess how it goes. Here’s a hint; even on Wall Street, a waltz is still a waltz.

‘Two steps forward, and one step back’. Always, since the dawn of markets and trading floors this has the beat that goes on. And, as much as we might like it to ‘always’ go up, it just doesn’t work that way. Let’s go to the charts, starting with a look at a 1-year, trailing return: 

In this chart we focus on two important things. We have 1) a red line showing the trajectory of the trajectory of the S&P index* over the past 12 months (more or less since the bottom in 2020 till the present) vs 2) a category of Super Growth stocks shown in green.

The red (S&P Index*) has clearly trended upward albeit rather timidly. Meanwhile, the Super Growth line (the green) has also been headed up but notice its level of enthusiasm. One cannot help but notice that (in this one-year timeframe) investments in Super Growth have significantly out-performed the S&P Index. However, look closely and you’ll note that over the past two months or so, super growth is taking it’s ‘one-step back’.

With the perspective of a 12- month look, it doesn’t seem to be a big deal. To those of you who have been on the super growth train, it is perhaps clear that the step back is just the working of the market…doing its thing. On the other hand, for one whose perspective begins on Jan. 1st of this year, the chart has a different appearance. Take a look:

Rather than seeing a major growth story, it appears that Super Growth is lagging the index. I guess one could say that perspective is everything. The one step back is the ‘penalty’ the market exacts as a payment for the huge two steps forward. 

Like so many things, when one is too close to the work, it’s sometimes hard to see the big picture, so for those of you who are focused on the past couple of months, we suggest that you look at the bigger picture, and realize that all investments, at some time or other, are dancing to the ‘Wall Street Waltz’.

And if you find yourself doing one step forward and then two steps back, that’s not good. Unless, rather than waltzing in a ballroom, you’re in a sawdust honky-tonk and line dancing.

Ronald P. Denk, CFP®
Investment Advisor
Denk Strategic Wealth Partners
10000 N. 31st Avenue, Suite C-262
Phoenix, AZ 85051
Phone (602) 252-8700
Fax (602) 252-8701
Toll-Free (877) The-Denk
www.denkinvest.com

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This weekly article reflects news, commentary, opinions, viewpoints, analyses and other information developed by Denk Strategic Wealth Partners for use with advisory clients only and/or select but unaffiliated third parties. DSWP provides Market Information for illustrative and informational purposes only. If you wish to receive this weekly commentary by email, please contact us at 602-252-8700 or by e-mail at lindaw@denkinvest.com. If you are receiving this commentary via email and would prefer not to please let us know either by email or phone.

Ronald Denk is an Advisory Representative offering services through Denk Strategic Wealth Partners, A Registered Investment Advisor. He is also a Registered Representative, offering investments through Lincoln Financial Securities Corporation, Member FINRA/SIPC.

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*The indices are representative of domestic markets and include the average performance of groups of widely held common stocks. Individuals cannot invest directly in any index and unlike investments, indices do not incur management fees, charges, or expenses, therefore specific index returns will be higher. Past performance is not indicative of future results.

Ron Denk is a Registered Representative, offering investments through Lincoln Financial Securities Corporation, Member FINRA/SIPC.

Mr. Denk is also an Advisory Representative offering services through Denk Strategic Wealth Partners, a Registered Investment Advisor. Denk Strategic Wealth Partners is not affiliated with Lincoln Financial Securities Corporation.

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Past performance is not a guarantee of future returns.