June 15, 2023
By Peter Bower
Last fall, after the October bottom, the Lonely Bull stated in his weekly blog that the stock market had probably entered a new bull phase. We have just gotten confirmation of that since the market is now more than 20% higher than that low. (20% increase is the definition of a new bull market.) The Bull and his partners also put out historical average returns for the following one, three, and five years. They are potentially very good. It looks like we are right on schedule.
Average Returns after a Recession
1 year – 21%
3 years – 50%
5 years – 100%
The question is now, “where do we go from here?’ The short answer is higher, maybe not in a straight line, but certainly much higher. There is no reason new all-time highs cannot be achieved. So, you missed the first 20%. Remember, not all stocks are up that amount. In fact, just a few are. Most have lagged. The market has been narrow, with just a handful of stocks accounting for most of the returns in the averages so far. However, participation is beginning to broaden out and include more and more companies. There is plenty of opportunity to still pick up bargains.
So many investors have been fixated on the likelihood of a recession. Therefore, many business-cycle sensitive stocks have been avoided. Now that the Federal Reserve has paused its tightening, and maybe finished, investors will probably reconsider. No recession changes the dynamic for these companies. They should play catchup to the rest of the market soon. Opportunity abounds! Even if we have a downturn, it would be mild, and these stocks could still do very well. It just may take a little longer. Be optimistic and stay steady my friends.
The Lonely Bull
