2013 markets were full of bull.
The economy continued to sputter along, growing at about 2%, unemployment remained high and corporate profits were mediocre. Yet the S&P 500 index rose a staggering 29.6%, its best performance since the go-go-days of 1997.
So what sort of bull drove this bull market? The Federal Reserve Board’s quantitative easing (QE) program, high-frequency trading and exuberant investors who shifted into stocks with renewed confidence.
When Fed Chair Ben Bernanke hinted in May and June that The Fed might start pulling back on its bond buying soon, the market initially fell and interest rates rose. But ironically, rising rates drove investors out of bonds and many invested further in stocks, pushing the market even higher.
More Bull in 2014?
As 2014 begins, the bullish sentiment continues. More than 60% of those surveyed by Investors Intelligence are now bullish and the bull-bear ratio is at a record level of more than four.
Bullish sentiment at this level is typically a good thing, though, as high investor enthusiasm typically leads to a drop in the market. When investors are at their most bullish, that’s when the stock market usually drops.