The S&P 500 closed at a record on Tuesday, an achievement that brings an official end to Wall Street’s shortest bear market and confirms the comeback rally as a new bull market.
The broad market index finished the session at 3,389.78, above its previous record close of 3,386.15 that it hit on Feb. 19.
A bear market is defined on Wall Street as a 20% decline in the S&P 500 from close to close. It’s only officially over when the market recovers back to a new closing high.
A bull market is a rally greater than 20%, but only becomes official when the S&P 500 hits a record closing high, according to Howard Silverblatt, senior index analyst at S&P Dow Jones Indices.
While defining a new bull market may be easy enough, Silverblatt explained that dating them can sometimes be confusing. That’s because the lifespan of a bull market, once declared, includes the recovery period from the S&P 500′s bear market bottom.
The new bull market, for example, was confirmed at the close of trading on Tuesday given the S&P 500′s fresh record close. But it’s actually as old as the market’s springtime bottom, which occurred on March 23, when the S&P 500 sank to a low of 2,237.40.
Because the S&P 500 hasn’t made any new lows since that date, strategists consider the bull market to have begun at the March 23 low, when the market’s recovery period started.
That means that bottom was the official end of the bear market and the start of the bull market. The springtime bear market of 2020 began on Feb.19 and shaved off 33.9% from the S&P 500.
This also means that the new bull market is already nearly 5 months old (again, since March 23) with a 51.5% gain.
The comeback has mystified many investors, who didn’t dream the benchmark index could even come close to all-time highs in 2020 after its dramatic Covid-induced sell-off in March. But the index has, little by little, clawed its way back from a bear market.
More recently, however, economically sensitive stocks like industrials, energy and financials have generated gains as investors bet on an eventual vaccine and return to a seminormal way of life.
The index is up 9.3% in the third quarter, which began July 1, and up 4.9% for 2020.
To be sure, some on Wall Street have varying views of what defines a bull or bear market but these are the most widely accepted definitions.