Happy 8th Birthday to the Bull Market

Eight years ago from yesterday the S&P 500 set its closing low of the Great Recession bear market. We couldn’t know it at the time, but that day marked the end to one of the worst bear markets on record. Since that low close of $676, the S&P has risen 250% to $2,365 where it closed yesterday. Here’s the path it took.

Pretty impressive. In fact, this bull market is the second longest and second strongest going all the way back to the Great Depression.

In addition to experiencing the second greatest rise since the Great Depression, this market is now also experiencing the second most stretched valuations of all time… just a few percent behind the Dot-Com Bubble. To be clear, that’s not a good thing.

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A New President, A New Baseline

With the inauguration of a new President, it seems appropriate to identify a new economic and market baseline as a fresh starting point for the incoming administration.

First, the conditions President Trump is inheriting then we’ll see how those conditions stack up to his five immediate predecessors’.

All data as of 12/31 of year prior to inauguration unless indicated otherwise.

There are many observations to be made, but I’ll focus on a few I find particularly interesting.

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The Second Longest Bull Market Since WWII…How Does It End?

Executive Summary

  • The S&P 500 is currently in its second longest bull market since WWII in terms of both magnitude and duration.
  • Various historically-reliable measures of market valuation are indicating returns in U.S. stocks over the next decade may be about half their historical averages or less.
  • It’s reasonable to expect at least a 40%-50% decline in U.S. stocks during the “bear” phase of this cycle. The bear phase will complete the current market cycle that began in March of 2009 (each market cycle begins with a bull phase and ends with a bear phase). The challenge, of course, is not knowing when the bull phase will end as we’ll only know well after it’s topped out.

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