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The Bull Turns 2, But Will It Suffer from "Terrible 2s?"

Happy Birthday, Bull Market! On Wednesday, the bull market turns 2 years old.

Rising from the depths of their multi-year lows 2 years ago, stocks have roared back fast and furiously as the bull market now enters its third year.


Although the Dow Industrials bounced back more steeply in the 2 years following the Crash of 1987 (when it more than doubled in value), the current 2-year rally is the S&P’s best 2 years in over 55 years. Meanwhile, prior to this current bull market, the Russell 2000 had never doubled in value over a 2-year period.

Happy Birthday, Bull Market! On Wednesday, the bull market turns 2 years old.

Rising from the depths of their multi-year lows 2 years ago, stocks have roared back fast and furiously as the bull market now enters its third year.


Investors will surely hope the 2-year old bull market can avoid a case of “terrible 2s.” So what typically happens to stocks in the third year of a bull market?

Sam Stovall, Chief Investment Strategist at Standard & Poor’s, notes “the magnitude of the market’s advances lessened.” In addition, since 1949, large caps stocks have outperformed small cap stocks more than half the time and have posted an average gain that’s more than double the meager rise in small cap stocks. That’s a stark contrast to the each of the first two years of a bull market, when small caps have outperformed large caps:

Happy Birthday, Bull Market! On Wednesday, the bull market turns 2 years old.

Rising from the depths of their multi-year lows 2 years ago, stocks have roared back fast and furiously as the bull market now enters its third year.


Furthermore, Stovall points out that most cyclical stocks, which are typical leaders in years 1 & 2 of bull markets, have fallen out of favor in year 3 for more defensive stocks.

Happy Birthday, Bull Market! On Wednesday, the bull market turns 2 years old.

Rising from the depths of their multi-year lows 2 years ago, stocks have roared back fast and furiously as the bull market now enters its third year.


Here’s how the major sectors have performed since March 9, 2009 – notice cyclicals have led the way:



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