by AggieDem
Stocks just did something they haven’t done in nearly three decades published December 31.
The article states that “US stocks are about to achieve a feat so rare that it’s only ever happened a handful of times. The S&P 500 is set to gain more than 24% this year after rising 24% in 2023. Back-to-back gains of over 20% would be the best performance for the benchmark index since 1997 and 1998, according to data from FactSet.
It’s an extraordinary event for the modern-day version of the index. (Precursors also racked up that kind of performance three other times, in 1927 and 1928, 1935 and 1936 and in 1954 and 1955, according to a Bank of America analysis.)”
I was not able to find that referenced Bank of America analysis, however I did locate some sources concerning the identified years. Some notes:
1997 and 1998: Markets continued to do well in 1999 before the dot com bubble burst, leading to a bear market and recession.
1954 and 1955: This was followed by a bear market in 1956 and 1957. “Between [August 1956] and the end of 1957 Standard and Poor’s average dropped 17.3%” per a Fed Reserve publication.
1935 and 1936: Followed by a recession in 1937 and 1938. “Stock prices fell 44 percent between February 1937 and April 1938” per this NBER Working Paper.
1927 and 1928: Followed by the Wall Street Crash of 1929 and the Great Depression.
So considering how markets have performed the past couple years, and that similarly performing markets in the past were followed shortly after by crashes or bear markets, does it make sense to stay in the market and ride out any crash or bear market that may or may not materialize in the next year?
I was 100% in S&P ETFs until early December before choosing cowardice and moving into treasuries (~75-80%) and money market funds (~25-20%). That move has paid off so far, but I question whether staying bearish continues to be the right move.
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