Category: Markets

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The Second Longest Bull Market Since WWII…When Will 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 less than half their historical averages.
  • It’s reasonable to expect about a 50% decline in U.S. stocks during the “bear” phase of this cycle just to bring valuations back to historical averages.

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Years of Gains Will Be Wiped Out in the Next Downturn

I believe that the next market downturn will wipe out several years’ worth of gains.

The chart below shows the S&P 500 price assuming hypothetical declines ranging from 10% to 60%. I also included the date of the first day the S&P 500 ever closed at or higher than yesterday’s closing price, days since that date, and approximate years since.


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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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