S&P 500 Index Rises 74.9% in One Year, "Strongest Bull Market Since 1936"

S&P 500 Index 3-Year Trend

[Asia Economy Reporter Byunghee Park] An analysis has emerged that the strong rebound in the New York stock market following the COVID-19 crisis was the strongest since 1936.

According to major foreign media on the 30th, Deutsche Bank reported that as of the 23rd, the New York Stock Exchange S&P 500 index recorded a 1-year increase of 74.9%, which is the highest 12-month increase in the S&P 500 index since 1936.

This was from the point when the U.S. central bank, the Federal Reserve (Fed), announced an unlimited quantitative easing policy. Starting March 3 last year, the Fed began lowering the base interest rate by 0.5 percentage points and subsequently announced measures to stabilize the financial market. This was to prevent financial market turmoil caused by the COVID-19 pandemic. Just over 10 days later, the Fed lowered the base interest rate by 1 percentage point, introducing a zero interest rate, and announced quantitative easing policies worth $700 billion and $4 trillion consecutively. Despite this, as the financial market did not stabilize, the Fed eventually announced an unlimited quantitative easing policy on March 23 last year.

Afterwards, the S&P 500 index rebounded strongly. When President Joe Biden was elected in the November presidential election last year, expectations for a large-scale economic stimulus bill further boosted the S&P 500 index’s upward momentum, ultimately achieving a historically strong bull market. Over the past year, the rise in the S&P 500 index was led by information technology (IT) companies such as Apple and Microsoft.

There are mixed signals about whether the S&P 500 index will continue to rise.

According to FactSet Research, IT company stocks are currently trading at about 25 times the expected earnings per share (EPS). Considering that the average price-to-earnings ratio over the past 20 years was around 19 times, this indicates that stocks are trading at a high valuation.

On the other hand, considering that the expected earnings growth rate of IT companies between 2020 and 2022 is 45%, it is analyzed that there is potential for further price increases.

According to Howard Silverblatt, senior analyst at S&P Dow Jones Indices, the average expected earnings per share of companies in the S&P 500 index rose 40% from $122.37 last year to $172.44 this year.

This content was produced with the assistance of AI translation services.