Menu
Date: June 8, 2020

Comparing This Bull Market Launch to 2009

Another new week begins, another pre-market rally in the stock market. I have to continue to say that the strength of the move is beyond unbelievable. I thought it was “unprecedented” until I looked deeper. When the trading range broke last month and I was expecting a possible fakeout, even if I was wrong, I didn’t think stocks would power ahead unabated like this. While people talk about this being “unprecedented”, that’s simply not true. When new bull markets launch, this is what happens.

They start as oversold rallies that do not stop to pull back. Getting more than a few days down during the initial leg is unusual and it investors to buy without comfort. Investors who play it even slightly on the cautious side are punished, forgetting about those who are outright cautious or, heaven forbid, short the stock market. Hindsight is 20-20 and I am sure all the revisionist history pundits knew this was coming or got it perfectly right. The fact is that the vast majority have gotten this wrong, but not everyone.

I always enjoy poking fun at pundits who are laughably wrong and refuse to ever admit it. Some TV shows have been full of bears for years and regardless of the decline, they keep thinking there is more to come. Several guys on a popular show just kept calling for the S&P 500 to plunge below the March lows by an enormous margin, 1500 in some cases. Then they claimed to have called the rally to 2600, 2800 and 3000 even though stocks were still going to plunge to new lows. Those usually wrong pundits occupy a special spotĀ  in my daily trading log.

On the flip side, you have to give credit to Marko Kolanovic, Mike Wilson, Tom Lee and Brian Belski who were on record very early on calling for a run to new highs sooner than later. I thought my call for new highs in 2021 with Dow 40,000 and S&P 4000 by 2023 was aggressive. I guess not aggressive enough.

Anyway, the purpose of this post was to compare the initial blastoff in 2009 to today and not get into a pundit analysis.

The first chart below is the 2009 bottom on the far left of the chart followed by the same two and a half month rally as we have today. In 2009, stocks rallied a very impressive 34% with nothing more than a dew days down here or there.

Below 2009 is 2020 where the rally has been 43%. Similar to 2009, there has only been a few days down here or there. The two rallies have lots of similarities.

When new bull markets launch, they do so with much power and a lot of disbelief. They go from being just another quick, oversold rally in a bear market to a real rally to a new bull market rally. We usually see the bears parade out the stats from 1929-1932 as well as 2008 to show that the magnitude of the move was also seen during long-term bear markets and not to be fooled by it.

Another new week begins, another pre-market rally in the stock market. I have to continue to say that the strength of the move is beyond unbelievable. I thought it was “unprecedented” until I looked deeper. When the trading range broke last month and I was expecting a possible fakeout, even if I was wrong, I didn’t think stocks would power ahead unabated like this. While people talk about this being “unprecedented”, that’s simply not true. When new bull markets launch, this is what happens.

They start as oversold rallies that do not stop to pull back. Getting more than a few days down during the initial leg is unusual and it investors to buy without comfort. Investors who play it even slightly on the cautious side are punished, forgetting about those who are outright cautious or, heaven forbid, short the stock market. Hindsight is 20-20 and I am sure all the revisionist history pundits knew this was coming or got it perfectly right. The fact is that the vast majority have gotten this wrong, but not everyone.

I always enjoy poking fun at pundits who are laughably wrong and refuse to ever admit it. Some TV shows have been full of bears for years and regardless of the decline, they keep thinking there is more to come. Several guys on a popular show just kept calling for the S&P 500 to plunge below the March lows by an enormous margin, 1500 in some cases. Then they claimed to have called the rally to 2600, 2800 and 3000 even though stocks were still going to plunge to new lows. Those usually wrong pundits occupy a special spotĀ  in my daily trading log.

On the flip side, you have to give credit to Marko Kolanovic, Mike Wilson, Tom Lee and Brian Belski who were on record very early on calling for a run to new highs sooner than later. I thought my call for new highs in 2021 with Dow 40,000 and S&P 4000 by 2023 was aggressive. I guess not aggressive enough.

Anyway, the purpose of this post was to compare the initial blastoff in 2009 to today and not get into a pundit analysis.

The first chart below is the 2009 bottom on the far left of the chart followed by the same two and a half month rally as we have today. In 2009, stocks rallied a very impressive 34% with nothing more than a few days down here or there.

Below 2009 is 2020 where the rally has been 43%. Similar to 2009, there have only been a few days down here or there. The two rallies have lots of similarities.

When new bull markets launch, they do so with much power and a lot of disbelief. They go from being just another quick, oversold rally in a bear market to a real rally to a new bull market rally. We usually see the bears parade out the stats from 1929-1932 as well as 2008 to show that the magnitude of the move was also seen during long-term bear markets and not to be fooled by it.

Paul Schatz, President, Heritage Capital
Author:

Paul Schatz, President, Heritage Capital