BULL MARKET SHOWS AGE AS 7TH BIRTHDAY NEARS
Stocks have struggled in past year, but some say the bull will continue to defy skeptics
It’s often said that bull markets don’t die of old age. That’s a good thing. Why? Because the current stock market bull, which was born March 9, 2009, three months before the official end of the Great Recession, celebrates its 7th birthday Wednesday, a long life only two other bulls have enjoyed.
Still, despite that the bull sported a 215% gain back in May when the Standard & Poor’s 500 index posted its last closing high — which ranks fifth best of all- time, according to S& P Dow Jones Indices — and has lived a full 84- month life so far — about two years longer than the average bull market and the third- longest in history — the aging bull is showing signs of its age.
“Time to buy the bull an AARP membership,” quips Howard Silverblatt, senior index analyst at S& P Dow Jones Indices.
Year seven hasn’t been a healthy one for the bull, as the S& P 500 has dipped 4.8% since its 6th birthday and after Tuesday’s close of 1979.26 is still hovering below the 2000 level, despite closing above that milestone for the first time in August 2014.
While the large- company U. S. stock index has yet to eclipse the 20% drop required to mark an official end to the bull market and usher in a bearmarket, it did tumble more than 15% at its intraday low back on Feb. 11. A large number of companies in the index— 212 to be exact—
are still downmore than 20% from their highs hit since the start of 2015, which means a good chunk of stocks in the index are in bear- market territory.
In its prime, the bull racked up some big gains, including a nearly 69% surge in its first year.
The gains, first powered by investors looking to profit from the mega- bounce off the lows after the S& P 500 cratered nearly 57%, were fueled later by the Federal Reserve’s easy- money policies. The U. S. central bank, starting in 2007, pushed down interest rates and borrowing costs to artificially low levels, giving the economy a much- needed boost and lifting it out of recession. The rock- bottom rates also made stocks a more attractive investment compared with other assets, such as government bonds.
A seven- year period of zero interest rates, which the Fed ended in December with its first rate hike in nearly a decade, led to a feeling onWall Street that stocks were the best place to park cash for investors looking for a decent return. That viewpoint launched the acronym TINA, or “There Is No Alternative” to stocks. The bull run was also fueled by corporate America’s purchases of its own stock, a buyback boom that created a major source of fresh demand for stocks and made corporate earnings growth look better as profits were spread around fewer outstanding shares.
So where does the aging bull go from here? Can it make another new all- time closing high and avoid a 20% top- to- bottom decline by the end of May and surpass the second longest- running bull that ended back in August 1956, which lasted 85 and a half months)?
For this bull market to officially show seven years in the record books, it would have to make a new closing high. If not, and it drops 20% or more into a bear market, the official end of the bull market will be the current peak of May 21, 2015 — or just 6 years and 2months old, notes Sam Stovall, U. S. equity strategist at S& P Global Market Intelligence.
The current bull could continue to defy skeptics despite graying around its horns, argues Brian Belski, chief investment strategist atBMOCapital Markets.
“This is a stealth bull ( that) no one ( on Main Street) believes in,” Belski says.
“Why is the bull market not over? Because stocks are slightly lower this year and were flat last year. This is the reset and respite that all bull markets have. This is normal and healthy.”