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.

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”

Are You Prepared for the Next Bear Market?

My expectation for losses in U.S. stocks during the next bear market is over 60%, which would take us back about twenty years and would require at least a 150% gain just to get back to even.

What impact would such a loss have on your portfolio? What impact would that have on your ability to retire or sustain your retirement lifestyle? Would any other financial goals be impacted? How about the toll on your mental health to see such a large chunk of your life savings wiped out. Continue reading “Are You Prepared for the Next Bear Market?”

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.

Continue reading “The Second Longest Bull Market Since WWII…How Does It End?”