Bull market reaches 10 years

S&P 500 has more than quadrupled in value during this span.

In early 2009 on Wall Street, the stock market was mired in a deep slump stemming from the housing and financial crisis then gripping the nation. On March 9 that year, the Standard & Poor’s 500 index closed at 676.53, down a whopping 45 percent from just six months earlier.

“The numbers are mind-bogglingly awful,” The Los Angeles Times reported the next day, but noted some analysts believed the market was “overdue for a snapback.”

They were right, and what a snapback it proved to be, as stock prices then took off in what eventually would become a record long-term rally.

Investors today will celebrate the 10-year anniversary of the longest bull market on Wall Street since World War II — defined as at least a 20 percent rise in the benchmark S&P 500 index from its previous low — and the rally has generated a gain of nearly $18 trillion in the index’s market value, according to S&P Dow Jones Indices.

The S&P 500 has more than quadrupled in value during that span as the market repeatedly withstood a barrage of events that threatened to end the bull’s run.

Many of those head winds have occurred in just the past few months, after the market reached record highs. They included the Federal Reserve’s raising of interest rates last fall, the escalating U.S. trade battle with China that lifted tariffs on both sides, fears that the nine-year U.S. economic expansion was about to end and a surge in market volatility, with the Dow swinging by hundreds of points each way in a single session.

Why has this bull lasted so long? Analysts point to three main reasons: Interest rates have remained

low during the past 10 years, inflation has remained subdued, and the economy and corporate profits have kept growing.

The Federal Reserve engineered the low-rate setting in good part by purchasing more than $4 trillion in Treasury and mortgage bonds during and after the financial crisis in 2008-09, a move intended to bolster the economy.

That move also drove down returns on low-risk assets such as Treasury securities and forced investors searching for higher returns into more risk-bearing assets such as stocks.

With the economy growing again, the central bank has been shrinking its bond portfolio and lifting shortterm rates. Some analysts suggested those moves have contributed to the market’s recent volatility, such as in December when stocks tumbled and the S&P 500 dropped 9.2 percent for the month.

There are secondary reasons cited for the bull’s duration as well. No external shock to the markets, such as the 2008-09 financial crisis, has been severe enough to halt the bull market in its tracks. Last year’s tax overhaul led by the Trump administration, which included a cut in corporate tax rates, also helped stimulate more earnings growth.

With all those economic fundamentals still in place, “I see no reason why the bull market cannot continue,” said Jason Ware, chief investment officer of Albion Financial Group.

Others are more cautious, including Josh Brown, chief executive of Ritholtz Wealth Management and author of the popular blog TheReformedBroker.com.

He noted that the S&P 500 not only remains 6 percent below its record high of 2,930.75 reached Sept. 20, it’s also still below its close of 2,823.81 at the end of January 2018. “We’ve gone nowhere in 13 months,” Brown said.

“If we don’t make a new high above the January 2018 high, and stay above it, there is a school of thought that we’ve already topped out,” he said.

Bull markets typically “don’t end because they get tired,” Brown said. “Usually the reason is people have taken on the maximum amount of leverage and risk because they forget about the bad times,” together with a major event such as the dot-com bust of 2000 or the financial crisis a decade ago, he said. Sometimes the “event” that eventually kills the bull market isn’t even obvious at the time, he said.

And now? Brown never tries to forecast the market’s future, but he added: “If a bear market were already underway right now, I wouldn’t be shocked.”

AP FILE Analysts point to three main reasons for the bull market: Interest rates have remained low during the past 10 years, inflation has remained subdued, and the economy and corporate profits have kept growing.