Wall Street Journal

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The Most Hated Bull Market Keeps Chugging Along

Wall Street Journal

- ‎2 hours ago‎

The seven-year bull market in stocks still doesn't get much love. That is precisely why more milestones could be in the offing.

Year of Pain Erased for Bulls as S&P 500 Surges Back to RecordBloomberg

S&P 500 finally eclipses May 2015 recordUSA TODAY

In Depth:Stocks climb 'wall of worry,' all the way to all-time highLos Angeles Times

 

The Most Hated Bull Market Keeps Chugging Along

Stock rallies typically don’t die from too much skepticism. This one likely won’t be an exception

ENLARGE

The S&P 500 rose to a record closing high Monday. Above, traders worked on the floor of the New York Stock Exchange in May. Photo: Reuters

By

Steven Russolillo

July 11, 2016 4:08 p.m. ET

6 COMMENTS

The seven-year bull market in stocks still doesn’t get much love. That is precisely why more milestones could be in the offing.
The S&P 500 closed at a record on Monday—its first since May 2015 and the 109th of this bull market. Yet the higher stocks climb, the more skeptical investors seem to get, at least judging by where they put their money.
That lack of exuberance and the market’s increasing resilience could be exactly what propel stocks in the months ahead.
Consider the reaction to Brexit. Investors pulled nearly $8 billion from U.S. equity funds in the week following the June 23 U.K. vote to leave the European Union, the fourth biggest weekly withdrawal of the year, according to the Investment Company Institute.

That is also emblematic of a longer-term trend. Investors have yanked $64 billion from domestic equity funds this year through May, nearly double the withdrawal from the same period a year ago.
Yet stocks have continually withstood surprise developments, with Brexit being the latest. The S&P 500 slumped 5.3% in the two days following the U.K. vote. It only needed two weeks to bounce back.
Market reactions to unanticipated shocks, including the 2013 so-called taper tantrum and last year’s Greek referendum, have been shorter and shallower as the bull market has progressed, according to Sam Stovall of S&P Global Market Intelligence. Overreacting hasn’t been a winning strategy.

Now, the onus falls on corporate profits, with earnings season ramping up this week. Granted, it isn’t expected to be great. Profits are forecast to contract for a fifth straight quarter, according to FactSet. Yet analyst forecasts are almost always too pessimistic. Companies often clear a lowered bar. The S&P 500 has risen during four of the past five earnings seasons.
What’s more, before Friday’s trading, the S&P 500 had gone more than a year without setting a new 52-week high. Such a long stretch without one has only happened 20 other times, according to Jonathan Krinsky of MKM Partners. And following those occasions, the index averaged a 22% gain a year later.
Bull markets rarely die from too much skepticism. This one likely won’t be an exception.