Winners, losers during bull’s run
It’s been 8 years since market climb started
In the rodeo world, bucking bulls and their riders have to make their mark in eight seconds. Wall Street’s stock market bull and the investors who have hung on during its wild ride have made their mark by lasting eight years.
The second-longest bull market in U.S. history has nearly quadrupled the value of the Standard & Poor’s 500 stock index. But its strength has also caused valuations for stocks to swell nearly 30% higher than historical averages. And that has jittery investors wondering what’s next for the aging bull.
The Cliffs Notes version of the bull goes like this: It began on March 9, 2009, after the worst stock plunge since the Great Depression. It was nurtured by the nation’s central bank, which powered it with steroid-like stimulus injections in the form of cheap money. It overcame obstacles ranging from debt crises in Europe to natural disasters like hurricanes. It persisted through wars, terror attacks, a U.S. government shutdown, a downgrade of the nation’s triple-A credit rating and countless political scares. It also survived the start of an interest-rate-hike cycle in late 2015 by the Federal Reserve, the same central bank that had sustained it with a low interest-rate policy.
At the S&P 500’s closing high last Friday, the index had climbed 254% since March 2009. That put it within striking distance of the third-best performing bull market, which ended in the summer of 1956 after gaining just over 266%.
The bull’s big winners include biotechnology firm Incyte, up more than 6,500% over the past eight years; United Rentals, the world’s largest equipment rental company, up 4,002%; Alaska Air, up 2,632%; hotel company Wyndham Worldwide, up 2,561%; and online video streaming company Netflix, up 2,451%.
The biggest losers in the S&P 500 include oil and gas provider Southwestern Energy, down 74%; solar panel maker First Solar, down 70%; natural gas exploration company Chesapeake Energy, off 65%; telecom firm Frontier Communications, down 54%; and business supply retailer Staples, off 39%.
And that brings us to the question every investor on Wall Street and Main Street is asking: Should you keep riding what David Rosenberg of investment firm Gluskin Sheff calls a “momentum-driven” bull? Or should you jump off before it does a violent body roll that damages your portfolio and psyche?
There are reasons to embrace the bull and fear it, Rod Smyth, chief investment strategist at Riverfront Investment Group, told clients recently.
The case for stock prices going higher is based on investors’ confidence that the economy will continue to get better and that companies will post bigger profits. Smyth also said the market could get a lift from people diverting more of their available dollars into the stock market.
Aside from stocks trading near record levels, Gluskin Sheff’s Rosenberg said the argument for the market hitting turbulence includes stock valuations at 15year highs, signs that investors are too giddy — including the highest percentage of financial newsletters that are bullish since 1987 — and retail investors jumping back into the market since Donald Trump was elected president and investing “almost $80 billion” in U.S.-focused stock funds.
“Our advice,” Smyth said, “is to ride the bull but not to chase it.” In layman’s terms, that means if you are in the market, continue to follow your financial plan, such as making regular contributions to your 401(k) retirement plan each pay period, but don’t plow every cent of your cash into what is a pricey market.
One more thing to consider on the bull’s 8th birthday: The longest bull in history, which spanned most of the 1990s before topping out in March 2000, lasted about 91⁄2 years. The takeaway: The bull is likely much closer to its end than its midpoint.