By Matt Schreiber – WBI President and Chief Investment Strategist
Contrary to the recent media frenzy, the current bull market is the second longest running bull in modern history. While there is some opinion that the S&P 500 broke the bull market record on August 22, 2018, that is making an approximation of the market decline from July to October of 1990. The market declined 19.92% during that time.¹ Last time I checked, 19.92% did not equal 20% which is the definition of a bear market correction. Anyone can draw a line in the sand, but let’s not make approximations.
We’ve run 3,453 days without a 20% correction as of this publication. That’s long — but we have over 1,000 more days to go before we beat the record of 4,494 days from 1987 to the Dot Com crash of 2000.² This big bull posted a cumulative price return of 582% compared to this current bull market at 319%. That’s about 4% more return per day.
Since 1928, a very long period of time with both good and bad market cycles including the Great Depression of the 1930s, the average run for a bull market was 1,096 days. Which is a long stretch when you think about it, about 3 years of bull market return without a 20% correction. The average price return during the bull markets for this time period was 118%.
Since 1974, bull market stretches have lasted on average 2,765 days and yielded 270% price return. So, our current bull market at 3,453 days is long compared to these averages, but it’s nowhere near the longest actual bull run of 4,494 days in the heyday of the 1990s.
Could we go longer? I think so. That’s because we have tax cuts for corporations and individuals. Corporations are just starting to get that benefit and are planning for that, and the consumer has not yet gotten the benefit. We have 4.1% GDP growth, and great earnings and revenue for Q2.³
The overhang? Tariffs. Tariffs have been looming over the market, along with rising debt which is a concern. But if more and more people keep working and wages start to rise, this becomes a little less worrisome. The primary concern to end this run is the Fed. If the economy keeps growing at the pace it has been and wages start to rise because we have low unemployment, the Fed may raise rates quicker or potentially more each time. That could be a real tax on the economy and end this stretch, the second-longest bull market run, before it can become a true record. But I feel that’s more of an issue for 2019 or maybe 2020. All in all, I’m hoping for a positive end to this year.
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S&P 500 Index: includes a representative sample of large-cap U.S. companies in leading industries
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Sources
¹ Egan, Matt. “Market Milestone: This Is the Longest Bull Run in History.” CNNMoney, 22 Aug. 2018
² Yardeni, Edward. “Market Briefing: S&P 500 Bull & Bear Markets and Corrections.” 21 Aug. 2018
³ “Gross Domestic Product.” U.S. Bureau of Economic Analysis (BEA). Accessed 16 Aug. 2018.
