According to a report from the Wall Street Journal: "The U.S. stock market’s relentless march to all-time highs has grabbed plenty of headlines this year".
Yet it looks unremarkable by historic metrics.
The Dow Jones Industrial Average has set 50 record closing highs, while the S&P 500 is up 29%, on track for its best yearly gain since 1997. The S&P 500 has now risen 172% since bottoming in March 2009.
And yet the 57-month-long bull market following the depths of the financial crisis is on par with previous bull runs.
The S&P 500 has rallied about 165% during 13 bull markets (including the current one) dating back to 1928, according to Howard Silverblatt, senior index analyst at S&P Dow Jones Indices. Those bull markets have lasted about 57 months, on average, matching the current rally.
A bull market is characterized as a 20% increase from a prior low, ending when the index peaks and then falls by 20%.
The S&P 500 surged 417% from October 1990 through March 2000, the longest and best performing bull market, according to Mr. Silverblatt's calculations. The stock index advanced 324% from June 1932 through March 1937.
By comparison, stocks rallied 64% during a 31-month stretch from December 1987 through July 1990. And the market advanced 25% from October 1966 through November 1968 before falling into a bear market.
The current rally stacks up as the fifth longest and fifth-best-performing of the 13 bull markets through history, Mr. Silverblatt says. It is essentially in the middle of the pack, leaving few clues for what will happen when the calendar flips to 2014.
Some signs suggest this year’s stock rally will keep humming along. As WSJ’s Alexandra Scaggs reports, inexpensive stocks are leading the rally, with investors homing in on shares seen as bargains. Leading the S&P 500 this year are stocks with characteristics that broadly place them in the “inexpensive” category: those with relatively low valuations based on earnings forecasts and increasing estimated profits, among others.
The 100 stocks in the S&P 500 with the lowest price/earnings ratios rose 41%, on average, in the first 11 months of the year, compared with a 27% gain in the S&P 500, according to Fidelity.
The recent uptick in the market even after the Federal Reserve announced plans to start dialing back its bond-buying program is being viewed as a vote of confidence in the economy and the markets heading into the new year.
Meanwhile, Mr. Silverblatt of S&P suggests performance-chasing played a role in the market’s rally over the past few months, and could continue into 2014.
“Chasing returns is not a good reason to invest, but when enough do it, the short-term impact is more buying and higher prices,” Mr. Silverblatt says. “Absent large-scale profit taking or an incident, we may see another inflow of funds and another short-term uptick from investors chasing profits in the first few weeks of the year.”
Earnings season kicks off in the third week of January, which will “add or subtract from investors’ appetite to get back in the market,” he says.
