Research, Fundamental

Sector Watch: Hike, Skip, and a Jump

Sam Stovall, CFP, Chief Investment Stratetgist
05 June 2023


Last week’s market action was influenced by at least three factors:
1) the end of the debt ceiling crisis,
2) the increasing assumption that the Fed will skip raising rates at the June 14-15 FOMC meeting, and
3) the stronger-than-expected May jobs report, combined with a series of other impressive economic readings that imply that the U.S. may sidestep recession. As a result, stocks soared on Friday, June 2, sending the S&P 500 higher by 1.5% and closing within 10 points of a 20% advance off of the October 12, 2022 bear market low.

Should the S&P 500 close at or above 4292.44, it will have satisfied the first of two criteria we require before saying the S&P 500 in a new bull market. The other is time. As written in the “Bogus Bottom” Sector Watch on May 15, the Nasdaq has experienced false breakouts in four of eight bear markets since inception. For the S&P 500, there have only been three since WWII. Regardless, we think a new bull market can’t reverse course and set an even lower closing low and still be called a bull. The prior low has to remain intact for at least seven months. A summary of all bear markets since WWII is included in this report.

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