S&P 500 officially entered a new bull market yesterday after spending 248 trading days in the bear market territory.
The bull market happens after the index rallies 20% from the recent low. The S&P 500 needed to cross $4292.44 to enter the bull market, which happened on Thursday.
After entering the bull market, the S&P 500 continued to rise over the next 12 months 92% of the time (vs. avg. 75% overall), returning 19% on average (vs. 9% avg. overall) based on data back to the 1950s, according to Bank of America's data.
“Sentiment, positioning, fundamentals and supply/demand support that being underinvested in stocks and cyclicals is still the key risk today –the more likely direction of surprise is still positive,” BofA strategists wrote in a note.
However, they warn that “the wall of worry could continue until investors feel pain in long bonds or FOMO in equities.”
They also warn that the S&P 500 trading at 20x is not the reason to be bearish.
“When earnings fall as they are today, P/E ratios expand. It’s just math,” the strategists concluded.