On June 8, the S&P 500 closed at 4,293.93, which was more than 20% above its October 12, 2022 low, triggering the traditional indication of a new bull market. In addition, it signaled that the 14th bear market since WWII is now behind us. Most surprising during this month-to-date jump was the reversal of fortunes for both the S&P MidCap 400 and SmallCap 600 indices. These sizes were shunned for more than a year, ever since investors got wind of the Fed’s plans to begin raising interest rates.
As a result, investors have had to go back to 2016 to find a calendar year in which these two indices simultaneously outperformed the S&P 500. History now says, but does not guarantee, that the S&P 500 will rise further since the “500” gained an average of 14.5% during this post-20% period, over an average of 142 calendar days, before slipping into a new decline of 5% or more. Also, this mid- and small-cap leadership may be sustainable because of their absolute and relative valuations.