RICHARDSON GMP SEES LATEST BULL CYCLE LASTING LONGER

The stock market has entered a “solidly late bull” cycle, but gains could continue for some time, says Richardson GMP.

Stocks have been in an upward bull cycle since 2009, when the market bottomed following the financial crisis and resumed rallying. The question in the years since has been: how long will this bull last?

At more than seven years now, the current cycle is one of the longest ever. While late cycles tend to have more volatility, they can also last for quite some time, according to Richardson GMP.

“This phase often sees decent economic growth, narrowing market leadership by late cycle sectors, higher volatility, some signs of inflation and tightening monetary policy,” said Craig Basinger at Richardson GMP. “While not all present we are seeing more of these characteristics in the market place.”

Investors, of course, have to change gears in the current environment. While the low volatility and steady gains in the years following the financial crisis were a boon for bonds and for passive investing, the market now calls for a more active approach.

“With heightened volatility, investors should be more tactical,” said Basinger. “Trimming equity overweights during periods of market strength (like now) and deploying cash on market weakness.”

The strategist notes that while the evidence suggests we’re in a late bull, most financial indicators are not flashing warning signs that a bear market is right around the corner.

“The good news is the Late Bull phase is often the longest of all five phases and currently our market cycle model continues to point to a continuation of the bullish phase,” said Basinger. “Out of our 30 indicators, 23 are positive at the moment, which is a strong indication the cycle will continue. As an example, in the months preceding past bear markets the number of positive indicators dropped below 10.”