October Charts of Interest: Happy Second Birthday, Bull Market

The current bull market marked its second anniversary over the weekend, so I start by sharing data on what has historically happened next. I then share charts about Social Security, America’s aging population and big delays at TreasuryDirect. Let’s go.

The S&P 500 index realized a 33.7% return over the past 12 months through Friday, October 11. If historical patterns repeat, the next 12 months could be bumpy. In a note sent out on Monday, CFRA Research’s Sam Stovall observed that “11 bull markets that celebrated their second birthday experienced at least one decline of 5% or more in the subsequent 12 months, while some endured more and became new bear markets.”

Here’s what the S&P 500 has experienced during its third year of a bull market.

Stovall elaborated on the table: “The average return following the 11 bull markets that celebrated their second birthday was a mere 2.0% (5.2% if one excludes those that became bear markets before the third year was out). What’s more, all experienced a decline of 5%, while five endured sell-offs in excess of 10% but less than 20%, and three succumbed to new bear markets. Despite this unsettling intra-year volatility, three bulls posted double-digit gains.”

Bull Markets Can Hang Around

The average bull market has lasted 5.5 years, as this table from Carson Group’s Ryan Detrick shows. The variance is quite large though, ranging from two to 12 years.

It’s Been a Large-Cap Party

Sector performance has mostly been best at the large-cap level over the past two years. It has also mostly been worse at the small-cap level. The performance gaps are most notable in the communication services and information technology sectors.

First Trust Portfolios’ Robert Carey, CFA, and Peter Leonteos say the outperformance in large-cap stocks has caused lopsidedness in the S&P 1500 index. Combined, the S&P SmallCap 600 index and the S&P MidCap 400 index comprised just 8.1% of the total market capitalization of the S&P 1500 as of September 30, according to Carey and Leonteos. Prior to the coronavirus pandemic, the last time that small and mid-sized companies accounted for 8.1% or less of the S&P 1500’s market cap was April 28, 2000.

An Average Increase in Social Security Benefits

Social Security benefits for retirees will rise 2.5% in 2025. This is very close to the 20-year average increase. The annual change is based on the third-quarter 2024 change in inflation year over year. Technically, it is the increase from the third-quarter of the prior year to the third quarter of the current year in the consumer price index for urban wage earners and clerical workers (CPI-W). As always, the Social Security Administration’s (SSA) inflation gauge may not match the price increases on the goods and services you buy.

Annual Social Security Cost of Living Adjustments (2005–2024)

 Source: Social Security Administration. 

The U.S. Continues to Get Older

A trend facing developed countries, including the U.S., is a rising age dependency ratio. This ratio compares the number of older adults (people older than 64) to the working-age population (those ages 15 to 64). Not only does it impact the economy and how people work, it also impacts care. The higher the ratio, the fewer caretakers there are to help those who need their assistance.

A Big Slowdown at TreasuryDirect

If you bought Treasury bonds through TreasuryDirect and want to transfer them out, be sure you possess a large dose of patience. “People who want to move investments from their accounts on the [U.S. Department of the Treasury’s] website to their brokerage accounts may have to wait as long as a year,” notes The Wall Street Journal. The delay is due to the large number of new accounts opened following the jump in bond yields in 2022, including Series I bonds.

Make sure you have your username, password and correct bank information. On the website, the Department of the Treasury says that “unlocking your TreasuryDirect account or updating your banking information within that account” may take two weeks.