This is the longest bull market in history…or is it….

Today, the bull market turns 3,543 days old…maybe.

We tend to break up the market cycle into bull phases (rising markets) and bear phases (falling markets), which makes sense. However, the demarcation of each, a 20% rise or fall, is completely arbitrary. Why isn’t it 30%, or 21%, or 19%? Why does it have to be 20%? In any case, that’s the most widely used definition so that’s what we’ll use here as well.

However, there is another element that confuses the issue. Although yesterday the S&P 500 set a new all-time intra-day high of $2,873.23, the S&P 500 fell off towards the end of the day so that it still has not closed above the January 26th all-time closing high of $2,872.87 (closed at $2,862.96).

That means, based on closing price, we still do not have confirmation that this is the longest bull market in history as it’s possible January 26th remains the top for the bull market that began in March of 2009 and, therefore, the beginning of the bear market. Another market issue that can only be identified in hindsight. I guess we’ll find out soon enough.

Drivers of Return Since 1982 and What That Means for the Market Over The Next 10 Years

I came across an interesting analysis in Dr. John Hussman’s recent commentary that I’d like to briefly share.

In the commentary he talks about the primary driver of market returns throughout the various cycles since 1982. It’s very important to understand this if you want to understand the potential return outcomes for the duration of the market cycle…emphasis mine Continue reading “Drivers of Return Since 1982 and What That Means for the Market Over The Next 10 Years”

Signals Through the Noise

It’s no secret that I have been concerned about both (1) our proximity to the next bear market and (2) the potential severity of the decline in the next bear market.

A tricky thing about bear markets, however, is that we can be in one for a long time before we even realize it. That’s because bear markets can only be confirmed in hindsight only AFTER losses have become sufficiently severe. That doesn’t do the “reactive” investor any good because by the time it is known we are in a bear market (or a recession) it’s almost too late to do anything about it. The only way to avoid being reactive is to be proactive, which can only be accomplished if you understand history and are able to pick up on meaningful signals through all the noise. Continue reading “Signals Through the Noise”

Question I Was Asked In Several Quarterly Client Meetings

In my Q1 market review, I mentioned that both U.S. bonds and stocks were down together for the quarter, and that was a relatively rare occurrence. I mentioned that only happened 8 other times in the previous 30 years. This was concerning for a few clients.

The primary reason it was concerning for some clients is that I generally have portfolios positioned more conservatively than I would in a more “neutral” environment. In other words, I have a targeted range to which I am bound for each client and am currently positioned on the conservative end of that range for most clients. The reason for the relatively conservative positioning is that I am concerned about stock market valuations (i.e. stocks are about as, or more, expensive as they were in 1929 and 2000…depending on the metric).

So when both bonds and stocks decline together it makes folks nervous. After all, isn’t the idea that bonds will hold up when stocks are declining? To add insult to injury, bonds actually declined MORE than stocks in the first quarter. As a result, several clients asked me, “Why did that happen?” “Will it continue?” “Is this still the right strategy?” Continue reading “Question I Was Asked In Several Quarterly Client Meetings”