The S&P 500 bear market is finally over. That’s great news, but what does it mean for your wallet?
Good things, it turns out. The S&P 500, led by outperforming stocks at times like Target (TGT), TJX (TJX) and Tyler Technologies (TYL), always rallies within a year of a bear market ending, according to an Investor’s Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith.
Each of these stocks has jumped an average of 30% — or more — in just 12 months after a bear market ended. Some have done much better than that. And all of them topped the S&P 500 in each of those periods after the end of bear markets dating back to 1971.
It’s exactly the kind of bailout investors could use after the brutal 162 trading days it took to quell the last bear market. That’s how long it took the S&P 500 to rise 20% from the 2022 bear market low by June 9, says Ryan Detrick, strategist at Carson Group.
“Once stocks are more than 20% off bearish lows, did you know that a year later stocks have never been lower?” he said.
Bear markets open better times for S&P 500 investors
Bear markets are painful to live with. But they still pave the way for better returns for S&P 500 investors, Detrick says. And you don’t have to wait long to earn money.
The S&P 500 has gained 28.2% on average in the 12 months after rising 20% from bear market lows, Detrick says based on the past six bear market rallies. And get this: the S&P 500 has never failed to go higher after a 20% rally from the lows. And it was higher not only over the next 12 months, on average, but also over the previous six, three and one month. It’s bullish either way you look at it.
Take for example the short-lived and most recent bear market of 2020. The S&P 500 rebounded 20% from the low of this bear market on May 6, 2020. amazing subsequent gains. The S&P 500 rose 12.1% in just one month and rose 47.5% over the next 12 months, Detrick found.
But which S&P 500 stocks lead when bear markets die?
Finding the Best S&P 500 Stocks in New Bull Markets
Some S&P 500 stocks definitely stand out when bear markets finally die. Reliably.
Retailer Target is a favorite stock in new bull markets. Shares of the company have topped the S&P 500 every year after the past five times the market has rebounded 20% from a bear market low. And Target stock has gained a mighty 104.5% on average over those periods. That’s more than any other S&P 500 stock.
A Target rally would be welcome as the company’s stock is out of sync with its surprisingly bullish fundamental expectations. The shares are down 14.1% this year, even though analysts believe the company’s earnings will rise more than 38% this fiscal year and another 23.7% in the following fiscal year. Discount retailer TJX is another retailer whose stock isn’t doing much this year but has beaten the market when bear markets end.
However, not all bullish stocks limp this year. Tyler Technologies, a company that provides IT services to the public sector, has already seen its shares jump more than 20% this year. But it’s also a stock that tends to continue to perform well even after the S&P 500 jumped 20% from lows. Like Target, it has outperformed the S&P 50o after each of the last five times bear markets have ended. And it climbed nearly 80%, on average, in the 12 months following that event.
So don’t delay in celebrating the 20% rally from the bear market lows. It’s time to make some money on S&P 500 stocks again.
These stocks thrive when bear markets die
All outperformed the S&P 500 after a 20% rally from the last five bear market lows
|Business||Teleprinter||Avg. first 12-month gains in last five new bulls||Sector|
|TJX Companies||(TJX)||81.1||Consumer Discretionary|
|Tyler Technologies||(TYL)||79.7||Computer science|
|Host Hotels and Resorts||(HST)||79.7||Real estate|
|Ford engine||(F)||62.8||Consumer Discretionary|
|J. M. Smucker||(SJM)||58.4||Basic consumption|
|DuPont de Nemours||(DD)||44.4||Materials|
Sources: IBD, S&P Global Market Intelligence
Follow Matt Krantz on Twitter @mattkrantz
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