Ismael De La Cruz | Oct 06, 2022 11:12
The S&P 500 started the month with an impressive rally, jumping +5.7% between Monday and Tuesday—its best performance on the first two trading days of a Q4 in history. The previous record was in 1990 when the index gained 3.1% on the first two days to end the quarter up +4.6%.
However, this is not as unusual as it sounds. If you look at the 100 most significant daily rises in the S&P 500 since 1928, you would think that most of them were in a bull market, but they were not. In fact, more than half (58%) were in bear markets.
We can point to two main short-term reasons for the jump:
Moreover, the S&P 500 lost -9.34% in September. Apart from 2008, every other time, it lost -7% or more in September, stocks went on to rebound in October:
The current bear market is the longest since 2007-2009. The average duration of a bear market over the last 82 years is 14 months, although it is true that there have been all kinds of durations in all that time. For example, the 2020 bear market only lasted one month, and the 2000-2002 bear market lasted 31 months.
I find it hard to believe that markets have ended the bearish streak. And I have four reasons to believe that:
To end on a positive note, we are in October, a month typically 36% more volatile than the average of the other 11 months of the year. For the time being, the VIX volatility index is holding up and is nowhere near its previous peaks for the year.
Disclosure: The author does not own any of the securities mentioned in this article.
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