What Matters About Market History, and the Worldwide Bull Market

Market Overview - 80% of the 70 companies tracked by Callum Thomas have stock markets that are up at least 20% off their 52-week lows, a sign that has historically indicated positive market conditions [2] - The year-to-date rally in US stocks is the broadest ever, with a record number of individual stocks in the S&P 500 outperforming the index [2] - The forward PE of the MAG 7 (excluding Tesla) is now below that of the consumer staples sector, which has returned almost 15% so far this year [2] Mortgage Rates and Housing Market - The current 30-year fixed mortgage rate is 6%, down approximately 80 basis points from a year ago, marking the lowest level since 2022 [3] - The Case-Shiller National Home Price Index rose by 1.3% in December, down from 1.4% in November, indicating a slowdown in home price growth [3] - The total amount in home equity lines of credit (HELOCs) rose to $434 billion, up 36% over the past four years [3] Historical Market Trends - The S&P 500 has lost more than 10% in only 12 calendar years since 1928, indicating that the market has been profitable or lost less than 10% in almost 88% of calendar years [3] - Historical data suggests that fear and greed are constant drivers of market behavior, despite changes in technology and market structure [7] Key Economic Indicators - Earnings and profit margins are at record highs, with strong revenue reported for the fourth quarter [11] - Market breadth remains solid, with the S&P 500's advance-decline line hitting new all-time highs, indicating a healthy bull market [12] - Credit markets are functioning well, with no significant stress observed in high-yield spreads, suggesting confidence in the economic outlook [13] Global Economic Context - Emerging markets and developed international economies are showing strong growth, contributing positively to global economic conditions [14] - Business investment, particularly in AI, remains robust, indicating ongoing economic strength despite some weaknesses in the housing sector [14] Inflation Outlook - Inflation is expected to stabilize around 3%, higher than the Fed's target of 2%, influenced by commodity prices and shelter costs [16][17] - Historical averages suggest that inflation has typically hovered around 3.5% over the past 150 years, supporting the outlook for a 3% inflation environment [16] Investment Opportunities - Current market conditions present opportunities in software stocks, which are considered undervalued relative to the S&P 500 [18] - The market's volatility may create buying opportunities for long-term investors, particularly in sectors that have seen significant pullbacks [18][20]