The strong initial rally in the stock markets between March and September of last year, driven by rising valuations, is very typical of the initial “hope” phase of a bull market, which generally begins during a recession when earnings are still falling. 

This phase is usually followed by what we call the “growth” phase, which is what we expect to see this year, as global stocks are generating earnings growth of around 35%. 

Often, the transition between the two phases is marked by increased volatility and a market pullback as investors either anticipate or begin to doubt the recovery that has already been priced in, just as we saw after the initial sharp rally in the stock markets in 2009.

The Typical Pattern of the Stock Market Cycle

S&P 500. Average market cycles since 1973

We are currently entering the “Growth” phase of the new cycle