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This headline1 from CNBC in August is probably more wishful thinking than thoughtful analysis. Yet the current bull market starting in March 2009 has already lasted over 100 months when measured by monthly returns and a 20% threshold. During that time, the market has risen over 300% in total return. While the length and strength of this bull market have been strong, is this typical of a bull market? Do we know how long they should last?

In the chart below you can see that bull markets in the 80s and 90s were both quite significant. If you believe that is the norm, and future returns would mimic that pattern, then the current bull market is just getting started. If you believe the new normal should look more like the most recent recovery seen in the mid-2000s, then this bull market is becoming long in the tooth.

Bull Market

Morningstar Direct 2017. Monthly returns. Bull and Bear Markets categorized by +/- 20% cumulative gains on monthly returns. Indexes are unmanaged baskets of securities that are not available for direct investment by investors. Index performance does not reflect the expenses associated with the management of an actual portfolio. Past performance is not a guarantee of future results. All investments involve risk, including loss of principal.  

Nobody knows how long this or future bull markets will last. But there are some important take-aways from this chart:

  • Since 1970 the average bear market shown has lasted about 20 months
  • Recoveries can happen quickly — nobody expected the market to perform so well in the spring of 2009, or would have expected the rally to continue for so long and at such a smooth pace

Yet a combination of the smooth rise and tranquil markets that we have seen for the last few years leads to headlines like the above. We do not know exactly what returns will be going forward, but we are confident they will not follow the exact path they did in the past.

With U.S. stock markets hitting all-time highs and volatility at historic lows, what should you be doing with your asset allocation? Watch our most recent Making Sense of Markets video for some ideas to cover at your next client review meeting.

 

1 “ ‘The bull market could continue forever’ – strategist Jim Paulsen outlines conditions,” Matthew J. Belvedere, Aug 4, 2017, CNBC

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