The current bull market, defined by prices that continue rising without interruption by a 20% decline, began for the S&P 500 in the depths of the recession in March 2009. Since then, the benchmark index has gained 295%, with just four official corrections—defined as a decline of 10% or more—the last of which happened in the beginning of 2016 (the latest volatility the market in the beginning of 2018 was only a drop of almost 8%).
While signs of a stock market bubble have continued to mount, from the Trump and Tax Reform rally’s sending the Dow and S&P 500 to new highs, belief still remains that their is much room left for the bull. As for bull markets, it is not the longest, nor is it the best in terms of performance.
How does the bull market measure up?
At 107 months old, this bull market (without a recession) is not the oldest in modern history (post-World War II): That title goes to the bull market that lasted from the fall of 1990 (soon after the recession of 1990) to the early spring of 2000, or 113 months, before becoming known as the dot-com bust. The record dot-com bull market, which is also the best-performing, with a 417% gain, lasted just a few months longer than the current bull market’s age. No bull market has ever made it to its 10th birthday without a recession (see graph below).
The current bull market is not the the runner-up in performance: The baby-boom bull market in the 1950’s is the second-best performer, with the market rising 267% during its seven year run. The S&P 500 was trading at a P/E of 30x earnings when the dot-com bubble burst in 2000; today the S&P 500 has P/E of about 25x.
How long will this bull market last?
No one knows, but it’s current age is likely very old and close to the end.
Sam Stovall, chief investment strategist for CFRA, stated that historically the longest bull markets “went out with a bang and not a whimper. Like an incandescent light bulb, they tend to glow brightest just before they go out.” The market performance had surpassed most Wall Street’s expectations in 2017, forcing many to raise their expectations for 2018.
The current bull market will most likely celebrate its golden birthday on March 9 this year, but will it march on to new heights. Since the modest recent correction, it has yet reached a new high.
The FED is not worried about a recession anytime soon and that might be a bad sign. The bond market is already pricing in four more interest rate increases this year. The yield curve is flatting and the most predictive indicator of a recession is an inverted yield curve. If the long end of the yield curve does not increase much like it has for the last few years and the short end continues to rise, then four rate increases would most likely result in an inverted yield curve.
It would seem that this bull market may turn into the longest bull market without a recession. My suggestion is to start hedging your risk just in case there is recession around the corner. If a recession is coming, some are saying gold is where you need to be. You can read more about another market valuation, the Shiller P/E.