Friday, October 11th 2024
Bull Market Celebrates Its Two-Year Milestone
The S&P 500 and Dow Jones Industrial Average both achieved new all-time highs today as the current bull market officially marks its two-year anniversary on Saturday, October 12. Since its bear-market low of 3,577.03 on October 12, 2022, the S&P 500 has risen an impressive 61%.
Historically, the average bull market lasts about 46 months, suggesting that if this cycle follows historical patterns, there could be approximately 22 months of continued growth ahead.
Nevertheless, there are indications that this bull market may exceed expectations. Over the past two years, the S&P 500 has consistently recovered from significant pullbacks, reaching multiple record highs in the process. Notably, in 2024 alone, one out of every five trading sessions has recorded a new closing high for the index.
The Q3 earnings season began today with strong results from major financial institutions. JPMorgan Chase reported a robust performance, significantly surpassing analyst projections:
Earnings Per Share (EPS): $4.37 vs. $4.01 forecasted
Revenue: $43.32 billion vs. $41.63 billion projected
JPMorgan Chase, the largest bank in the United States, is taking full advantage of the rising interest rate environment, showcasing strength and resilience in its financials. Additionally, BlackRock achieved a milestone with its assets under management (AUM) exceeding $11 trillion for the first time, pushing its share price to a record high.
BlackRock’s inflows contributed to a 15% increase in revenues, reaching $5.2 billion, while net income climbed to $1.63 billion. While much of the growth was driven by their core low-cost ETFs and index funds, BlackRock is also making strategic moves into higher-margin alternative assets.
While the market currently reflects a "Goldilocks" scenario, characterized by a balanced and optimistic investor sentiment, several risks could potentially escalate in the coming days or weeks, impacting market stability. Our strategy is to implement prudent hedging measures while maintaining positions during pullbacks to capitalize on opportunities and manage below downside risks effectively.
However, several risks currently loom:
Rising Yields: The 10-year U.S. Treasury yield has risen back to 4%, as market expectations for a rapid rate-cutting cycle have diminished. Despite this, markets have shown resilience, with investors buying dips throughout October, leading to new highs.
Geopolitical Tensions in the Middle East: Uncertainty in the Middle East remains unresolved, potentially impacting oil prices until at least after the U.S. election. With OECD inventories falling below their five-year averages and potential support for demand from China’s policy stimulus and U.S. rate adjustments, oil prices could remain elevated.
Increasing Oil Prices: The geopolitical premium on oil could function as a de facto tax on corporations and consumers, driving inflation higher in the months ahead.
Election Uncertainty: With the U.S. Presidential election approaching in less than a month, markets are historically subject to heightened volatility as investors adopt a more cautious stance.
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