With the closing bell, U.S. stocks on Wednesday marked what is being considered the longest bull market in history: 3,453 days. The S&P 500 bottomed out in March 2009 after the U.S. financial crisis. Since then, stocks have grown by more than 300 percent. The last time the S&P 500 rose consistently for this long was from 1990 to 2000. The historic mark is largely symbolic, but it does provide investors a chance to reassess the market’s long-term health and re-evaluate their strategies moving forward. What is a bull market? A bull market is the trend of stocks rising. It is the opposite of a bear market, when stocks are falling. Generally, a market is considered to have turned from a bull to a bear market when stocks lose more than 20 percent of their value. A drop that large has not happened since 2009, even though the market has experienced some volatility. In February, the Dow Jones Industrial Average saw the largest one-day drop in its history when it shed 1,175 points, or 4.6 percent. With that exception, “volatility has been surprisingly low,” said Vikram Mansharamani, the author of Boombustology: Spotting Financial Bubbles Before They Burst. He attributes the market’s steady nature to passive investing, a strategy that tries to maximize return by reducing the number of daily or short-term trades. Investors instead attempt to match the long-term trend of indexes like the Dow Jones Industrial Average. Volatility aside, on the whole, the stock market has been performing well. That is because bull and bear markets are defined by longer trends instead of daily stock moves. (Fun fact: It is unclear where the names for bull and bear market originate, but one of the most popular theories is that they are based on how bulls and bears attack–a bull thrusting its horns upward versus a bear swiping its paws down.) Should we expect a downturn soon? Just because the U.S. has experienced a bull market for so long, it does not mean a bear market is on the horizon. “All market cycles do come to an end, but when you look at the fundamentals of the economy, they are still strong,” said Tony Drake, a certified financial planner and CEO of Drake & Associates. One reason this bull market might last longer is it started from such a low point. In 2009, stocks had lost more than 50 percent of their value. The Dow Jones Industrial fell to its lowest since 1997. That means, the stock market had plenty of room to grow, and despite passing pre-recession levels, could still have room to run. Stability itself generates instability. It lulls people into expecting steady returns and underplays risks until they become so overwhelming that there is a total reversal. On the other hand, Mansharamani warns that complacency can be detrimental. “Stability itself generates instability,” Mansharamani said. “It lulls people into expecting steady returns and underplays risks until they become so overwhelming that there is a total reversal.” So far, the markets have shrugged off a number of risks, including tariffs, currency battles, rising interest rates and political turmoil in the Trump administration. On Wednesday, the Dow Jones and S&P 500 dropped slightly, presumably on the news that President Donald Trump’s former personal lawyer Michael Cohen pleaded guilty to federal crimes and the former Trump campaign chair Paul Manafort was convicted on eight counts of tax fraud. But the drop was minimal and the other major index, the NASDAQ, ended higher for the day. And one more important note. The old adage still rings true: The stock market is not the economy. So even if the economy is doing well, the stock market does not always follow suit. Should you change your investments? First, it is important to point out that only 55 percent of Americans have investments in the stock market, so if the stock market is doing well or poorly, many people’s finances are not affected directly. Second, for those who do hold stocks, every investor is different, so financial advisers say people should always evaluate their plans on a case-by-case basis. That said, Drake said older Americans should follow the generally accepted advice of taking on less risk, by moving more money into bonds over stocks for example, since they will need to start extracting some of their investments in the near future. Younger Americans, on the other hand, will likely go through several more bull and bear markets before they take out their retirement savings, so they need to make investments based on the long-term. However, there is one thing younger investors could do in case there is a correction soon. “It’s great to have some cash on the sidelines and think of it as a sale,” Drake said. “Put in money as it’s going down because we know it’s going to rebound at some point.”<doc-sep>U.S. stocks turned in a lackluster performance Wednesday, but this session goes down in the record books as the day that marked the longest bull market run in history. The current bull market began on March 9, 2009, when the S&P 500 was at 676 points, hard hit by the Great Recession. Nine and-a-half years later, and the S&P 500 has rallied about 323 percent. The tech-heavy Nasdaq Composite has been the biggest winner, with a 611 percent gain, a clear testament to the strength of the tech sector. The Dow Jones Industrial Average has appreciated about 300 percent. What does this mean for investors? For those who invested when the market was at or near the bottom, their pocket books should be heavier. While the S&P 500 gained about 323 percent, the biggest gainers among current S&P 500 constituent stocks saw far larger gains. Top-ranked GGP returned over 7,000 percent, so far, in this bull run. A look at the biggest losers paints a different picture. Over the period, the stock that experienced the biggest decline was Mosaic Co., whose shares fell 27 percent. The recession that hit caused nervous consumers to crimp spending, but in this bull run, there has been a major behavior shift. As it has continued, consumers have become more confident and as consumers have opened their purse strings, consumer-focused companies have benefited. So far in this rally, consumer discretionary, goods and services that are non-essential but desired by consumers if they have the disposable income, have led the performance. What happens from here? As the bull market has aged there have been some concerns that it would run out of steam. But, many believe it has plenty of room to run. Consumer spending makes up about two-thirds of U.S. economic growth, and economic data shows that consumers are confident in their finances. Just on Wednesday, when discussing the latest quarterly results, Target’s CEO Brian Cornell said, "we're currently benefiting from a very strong consumer environment — perhaps the strongest I've seen in my career." Companies have been particulary positive about tax reform, which President Trump signed into law in late 2017. As the bull market has aged, some have grown concerned that it’s only a matter of time until its momentum runs out.During an interview with FOX Business’ Neil Cavuto, Peter Eliades, editor of Stockmarket Cycles, said bear market indicators are evident in the markets, adding that he’d be “amazed” if the market moves above its current position 10 years from now.Other market experts are much more positive. Jeff Carbone, managing partner at Cornerstone Wealth, said in a statement, “While this bull may be showing some age, we still think there is plenty of room to run, and that stocks will again set all-time highs later this year.”<doc-sep>U.S. stocks last week reached an important milestone by becoming the longest bull market on record. From the rubble of the financial crisis, the market has risen like a phoenix to become a vibrant symbol of economic recovery and the potency of the Federal Reserve’s easy-money policy. Since March 2009, which many view as the birth date of the bull market, the S&P 500 SPX, +0.19% has rallied 320%, the Dow Jones Industrial Average DJIA, +0.03% has soared nearly 300% and the Nasdaq COMP, +0.59% has jumped 520%. But the journey to record territory has, by no means, been a smooth one, with each peak representing a hard-fought battle between bulls and bears. Joe Quinlan, head of market strategy for Bank of America, Global Wealth and Investment Management, in a Thursday note charted the S&P 500’s 10-year voyage from rock bottom to its summit that serves as a graphic paean to U.S. stocks. In so doing, he shared a few important lessons: 1. Scale and speed matter “The bigger the problem, the faster the required policy response to contain the collateral damage,” Quinlan wrote. The strategist believes the quick response from policy makers in the U.S. helped to keep the crisis from spreading, whereas officials in Europe were more gradual with their remedies, prolonging the problems, particularly in countries like Greece, Portugal and Ireland. “In the U.S., in contrast, the monetary response was wrapped in terms like ‘big bazookas’ and ‘shock and awe,’ aggressive terms that spoke to the need to act swiftly and decisively,” he said. In a series of market-supportive measures known as quantitative easing, the Federal Reserve injected trillions of dollars to prop up the economy and keep the banking systems from complete collapse, and in the process swelled its balance sheet to more than $4 trillion. Beginning in late 2015, the central bank started to normalize monetary policy, with the Fed expected to raise interest rates again in September. 2. Never bet against the U.S. The U.S. economy is among the most healthy and dynamic in the world, and no other stock market has delivered better returns, as the following graph demonstrates. “While super-easy monetary policies have certainly lent support to U.S. equities over the past decade, so too has a U.S. private sector that was quick to slash costs, boost productivity, shed unnecessary assets and restructure debt,” said Quinlan. The ability of U.S. companies to “reinvent” themselves in the wake of the crisis changed the economic landscape, according to the strategist, who highlighted energy firms’ innovation with shale technology for doubling U.S. oil output. 3. Money can’t buy love Quinlan argues that people have short memories. “After spending trillions of dollars in support of numerous industries and millions of households, many governments confront ornery constituents. How else to explain the recent surge in global populism and trade and investment protectionism?” he wrote. The strategist believes Brexit and Donald Trump’s presidency were prime examples of populism exploiting the “wounds and scars” of people still hurting from the financial crisis. 4. The global economy is one big family The U.S. is not an island, and what happens over there, matters here — as the market found out recently with Turkey’s currency crisis, where contagion to other regions emerged as a key concern. “The global economy and financial markets are highly interconnected and interdependent; shocks that seem localized can be symptomatic of wider systemic problems,” he said. In sum, the main takeaway for Quinlan from the past 10 years is that stocks may be volatile in the short term, but they almost always rise over the long term, financial crisis or not. This report was originally published on Aug. 23.<doc-sep>
The bull market in U.S. stocks on Wednesday became the longest in history, with even President Donald Trump chiming in as optimistic investors argue that the journey is far from over. The bull has thrived amid a decade of financial and political upheaval, thanks in part to the all-you-can-eat liquidity feast hosted by the Federal Reserve and other major central banks. Now the Fed has shifted to a tighter monetary-policy regime even as the same risks that have dogged this market over the years, including elevated valuations, persist, prompting some pundits to predict an imminent demise of the bull. But strategists, including John Lynch at LPL Financial, stress that the U.S. market still has plenty of upside. Read:Why this bull market may have miles to go before it sleeps “From tariffs to trade wars to inflation to a flattening yield curve to a global economic slowdown, the headlines continue to cast doubt on the sustainability of this economic cycle and bull market. Although we see several potential stumbling blocks, we continue to believe this economy and stock market rally have plenty of fuel left in the tank,” said Lynch, in a note. The underlying strength in the market on the back of government spending, robust earnings and improving confidence is expected to carry stocks higher for at least another year, if not longer, he said. One core reason for Lynch’s upbeat outlook is that he does not see the same types of excesses prevalent at previous market peaks, including obvious signs of recession. “While this bull market and economic recovery may very well be old, adding it all up, we see few signs that suggest an end is near,” said Lynch. Since March 9, 2009, which marked the low of the financial crisis and which many consider the birth date of the current bull market, the S&P 500 SPX, +0.19% has advanced 320%, the Dow Jones Industrial Average DJIA, +0.03% has risen 290% and the Nasdaq COMP, +0.59% has soared 520%. Furthermore, 2018 may go down in history as the year in which some popular investing mantras—“sell in May and go away,” notably—are turned on their heads. So far, the year has defied convention, with the S&P 500 climbing almost 7% since the beginning of May. To be sure, a near-term market retreat may not be completely out of the picture, given the typical seasonal weakness in August and September and as well as heightened political uncertainty ahead of midterm elections, but investors should view these dips as opportunities to buy, according to Lynch. “The S&P 500 closed in the green in April, May, June and July of this year, something that has happened in only 10 other years since 1950. In each of those years, stocks closed higher over the final five months of the year every time,” he said. In fact, during the duration of the bull market, the large-cap index’s performance over the next three months has been fairly solid, with the S&P 500 notching a median gain of 5.9%, according to Bespoke Investment Group. And during this three-month period, all S&P 500 sectors have risen, led by technology and energy sectors. See: This bull market may soon silence all the critics Lynch’s sunny outlook fits with bullish projections from other Wall Street strategists such as Stephen Suttmeier, a technical research analyst at Bank of America Merrill Lynch, who believes the S&P 500 could test 3,000 as early as 2019 given the market’s similarity to the bull market of the 1950s when interest rates started to rise from their lows. Meanwhile, not everyone agrees that the bull market began in March 2009, with some arguing that it is better understood as having begun in March 2013, when the S&P 500 took out its precrisis closing high, and others contending the current run began as recently as February 2016. Read:The ‘longest bull market’ in history? Not so fast Take for instance Jeff Saut, chief investment strategist at Raymond James, who firmly believes that a bull market does not always expire whenever there are bone-jarring crashes. “Just because there is 20% plus pullback, it does not end a secular bull market,” he said. In his view, the bull market that started in 1949 lasted until 1966, even with the more than 30% slide amid President John F. Kennedy’s 1962 steel crisis. He also argues that the bull market born in 1982 survived until 2000, withstanding the 1987 crash.