Mess With the Bull, You Get the Horns

Briton Ryle

Written By Briton Ryle

Posted May 16, 2024

For the 24th time this year, the S&P 500 has made a new all-time high. And for the 24th time this year, the chorus of bears has said “That’s it! That’s the top! No way stocks can go any higher than this!”

It’s the same bunch of stock market haters that were cheering for a recession in 2023. The same people that were calling for a market crash during the 2022 lows…

The S&P 500 bottomed in September 2022 at 3,585. And we knew why stocks were selling off in 2022 – inflation had hit 9.1% in June 2022 and the Fed had finally gotten serious with the rate hikes, whacking the economy with 0.75% hikes on June 16, July 27, September 21, and November 2.

Can’t blame anybody for not getting bullish in September, during that rate hike frenzy. But when the Fed started easing off the brakes in December 2022, and the inflation rate fell to 6.5%, there was a very good reason to start looking at the upside potential for stocks and the end of the rate hike cycle…

The Employment Market

The standard formula for any Fed rate hike campaign is that hiring will slow and layoffs will pick up to the point that the economy starts flirting with recession. 

That never happened. 

Employment numbers stayed strong throughout the Fed’s rate hikes. 

The resilience of the U.S. economy was even more remarkable because the Fed was hiking rates faster than it had in decades.

Part of the reason the employment picture stayed so strong was the recovery coming out of the pandemic. Another reason is the de-globalization trend that is bringing supply chains and manufacturing back to the U.S. 

24 New Highs 

But probably the bigger reason the stock market bottomed in September 2022 is corporate earnings. Great American companies have proven they can grow earnings even in the most challenging economic conditions. 

Again, there wasn’t much reason to bank on strong corporate earnings growth back in late 2022. But for investors that missed what happened in February 2023 and stayed bearish on the stock market, well, the signs were pretty clear…

Nvidia (NASDAQ: NVDA) reported one of the biggest earnings beats in stock market history on February 22, 2023. The stock was trading for $207 at the time. 

Nvidia also raised its guidance by more than any company has in stock market history. 

Nvidia’s earnings report kicked off the AI bull market. And that bull market has meant massive spending on semiconductors, software, electricity, servers and computers, data center construction, and commodities like copper and steel – there aren’t many areas of the economy that haven’t benefited from the bull market. 

So yeah, 24 new all-time highs for the S&P 500. A 48% rally for the S&P 500 over the last 18 months….

I can’t tell you there are 24 more new highs coming over the rest of this year. Seems kind of aggressive…

But I can tell you that 80% of America’s biggest companies just beat earnings expectations. And that’s without any interest rate cuts and with inflation remaining a little stubborn. 

You can even buy utility stocks today. The most boring, low growth, widows and orphans stocks on the market are enjoying an excellent bull market as electricity demand surges. 


 Briton Ryle
Chief Investment Strategist
Outsider Club


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