Mark Hulbert: No one knows which stocks will fuel the next bull market, but don’t bet on the bear market’s winners

by | Jan 6, 2023 | Stock Market

It’s too early to know which sector will lead U.S. stocks higher in the next bull market. But it’s not too early to have confidence that what it won’t be is the energy sector. Energy has been the best performer during this bear market. At no time over the last 5+ decades has the same sector been at the top of the sector rankings in a given bear market and in the subsequent bull market as well.

I reached these and other conclusions upon analyzing the S&P 500’s
SPX,
+2.53%
sector rankings in each bull and bear market since the early 1970s, courtesy of data compiled by Ned Davis Research. According to the firm’s bull and bear market calendar, since then there have been 14 complete bull markets and 14 complete bear markets. I found that, on average among the 10 S&P 500 sectors, the first-place winner in a given bear market’s ranking was in 9th place for performance in the subsequent bull market. Conversely, the sector ranked in 10th place (last) in a given bear market was in 4th place for performance in the subsequent bull market. What if you look back to the prior bull market as opposed to the immediately prior bear market? A similar picture emerges: On average, the sector at the top of a given bull market’s ranking drops to 5th place (out of 10) in the subsequent bull market. The sector at the bottom of a given bull market’s ranking climbs to 7th place, on average, in the subsequent bull market. The bot …

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