New 'Meme Stock' Fever Won't Kill This Bull Market By Sean Michael Cummings, analyst, True Wealth
An image of a man in a chair just cost short-sellers $2 billion... The post appeared on social platform X last week, shared by Keith Gill. Keith was the center of the meme-stock mania in 2021. You might not remember him by name. But his pandemic-era posts about video-game retailer GameStop (GME) drove shares up 30 times in January 2021. It was a euphoric time to be a retail investor... But it was also a sign of the market top. The S&P 500 Index peaked less than a year later and entered a bear market in 2022. It has been three years since Keith last posted on X (going by the username "Roaring Kitty"). Then, on Mother's Day, he broke his silence to post this image... GME soared more than 175% by Tuesday evening. The rally wiped out 10 digits' worth of short-seller value in about 48 hours. Now that meme stocks are back in the headlines, you might think that investor euphoria is back... and the top is almost in. But history disagrees. This bull market is still in its early phases... which means there's still plenty of time to make money before the peak is in. And a simple look back in time can show us why...
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The most recent bull market – which included the meme-stock mania – lasted from the pandemic bottom in March 2020 to January 2022. When GameStop peaked, there were about 11 months left until the bear market started. But what you might not realize is that the post-pandemic period was an anomaly... It was the shortest bull market in 90 years. To prove this, I looked through the history of the U.S. stock market and found every bull run since the bottom of the Great Depression. Then, I found the duration and returns for each one. The results were clear. It showed that the current bull market is still just picking up steam. Take a look... Since the bottom of the Great Depression, we've seen 15 bull markets in U.S. stocks. Their average length was 60 months. The longest bull market was 131 months (from March 2009 to February 2020)... And the shortest, as I mentioned, was the 21-month pandemic rally from March 2020 to January 2022. If the current rally ended today, it would be even shorter than that. Today's bull market sits at just 19 months. Of course, it took nearly 11 months for the market to peak after meme stocks rallied last time. But even if that happened again, it would only stretch the current duration to 30 months – still 50% shorter than the historical average. Simply put, the pandemic-era bull run was an outlier. It's a flawed benchmark for bull runs in the U.S. stock market. And you shouldn't plan for a repeat just because meme stocks are back in the headlines today. Instead, I suggest you view the recent action through a different lens... The bull market is rewarding risk today. As it continues "melting up," we're likely to see even bigger gains ahead... And we won't need to gamble on meme stocks to reap the benefits of this broad market boom. Good investing, Sean Michael Cummings Further Reading Online forum Reddit helped spark the meme-stock craze back in 2021. And in March, it filed to go public. Investing in a hot new stock might sound exciting. But at the end of the day, it's smarter to just avoid the hype... Learn more here. Investors haven't been too interested in volatile assets in recent months. But that's starting to change... Sentiment is shifting in favor of a "risk on" market. And that's good news for the current bull run... Read more here. |
Market Notes HIGHS AND LOWS NEW HIGHS OF NOTE LAST WEEK JPMorgan Chase (JPM)... financial giant
Bank of America (BAC)... financial giant
Goldman Sachs (GS)... financial giant
Moody's (MCO)... credit-ratings firm
Charles Schwab (SCHW)... brokerage services
Brown & Brown (BRO)... insurance
Markel (MKL)... insurance
Alphabet (GOOGL)... tech "World Dominator"
Qualcomm (QCOM)... semiconductors
Texas Instruments (TXN)... semiconductors
Dell Technologies (DELL)... laptops and PCs
Danaher (DHR)... science, health, and tech
Costco Wholesale (COST)... membership-only stores
Sprouts Farmers Market (SFM)... grocery stores
Procter & Gamble (PG)... consumer goods
3M (MMM)... manufacturing
Delta Air Lines (DAL)... airline
Motorola Solutions (MSI)... telecom
Duke Energy (DUK)... utilities NEW LOWS OF NOTE LAST WEEK Acadia Pharmaceuticals (ACAD)... biopharmaceuticals
Evolent Health (EVH)... health care services
Whirlpool (WHR)... appliances
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