A new record has been set on Wall Street despite fears of a yield curve inversion, emerging market distress and negative political news for the U.S.
The S&P 500 is now officially in the longest bull market in history. At least by the standard definition that states a bull market continues until we see a 20% drop from a prior peak based on closing price. By the traditional view, the current bull market started March 9, 2009, making it 3,453 days old on Wednesday.[i]
However, if intra-day price is used, then we did in fact have a decrease greater than 20% in 2011 when the S&P 500 decreased by 24% from the high on April 29 to the low on Oct. 3 of that year. The chart below shows the traditional definition, but viewing the high and low figures in the top right box, the intra-day high and low can be seen. That would mean the current bull market is not in fact the longest.
We believe arguing one way or the other is splitting hairs. The fact is that we have had a great run over the last few years. We think the underlying question investors are asking is, “the markets have gone up for a while, does that mean the end is near?” Our opinion? We don’t think so. Let’s remember that it has not been a smooth ride to this point. We have had four corrections in the current secular cycle. The typical definition of a correction is a decrease of greater than 10% in the S&P 500 using closing price. The last one happened earlier this year when the S&P 500 dropped by 10.1% in late January to early February.
To put things in perspective, let’s assume the current bull market began in March 2009 and let’s compare it to the last bull market from October 1990 to March 2000.
As can be seen, the bull market that ended with the dot-com crash had a much stronger price return. Today’s environment and valuations are much more favorable than back in 2000. We think the rally still has legs.
The Week Ahead
Next week we will be paying attention to the release of the U.S. Personal Consumption Expenditure Core Price Index. This is the measure the Fed closely tracks to gauge inflation. The market expects a change of 2.0% year-over-year, which is right were the Fed wants to see it.
– Luis Galmadez, Director of Research and Trading, Surevest Private Wealth
___________________________________________________________________________________________________________________
[1] Reuters Staff. (2018, August 22). S&P 500 bull market now arguably the oldest ever. Reuters. Retrieved from https://www.reuters.com/article/us-usa-stocks-bullrun/sp-500-bull-market-now-arguably-the-oldest-ever-idUSKCN1L718W?utm_campaign=trueAnthem:+Trending+Content&utm_content=5b7dca2b04d3015cf7be4bef&utm_medium=trueAnthem&utm_source=twitter
