Cheers to a Ten-year Bull Market…Not Really
A decade ago this month, the major U.S. stock markets reached their lowest point during the financial crisis of 2009. S&P 500 low was marked at 666 as the economy was a complete disaster and investors scurried for the exits. As with all market cycles, fear ultimately subsided, and the birth of a new bull market began…or did it?
Let’s first identify what characteristics make up a “bull market.” A bull market is the condition of a financial market of a group of securities in which prices are rising or are expected to rise. There is no specific and universal metric used to identify a bull market. Some mark the birth of a new bull market once the market eclipses its prior trading range by making new highs. Others believe it is a scenario in which stock prices rise by 20%, usually after a drop of 20% and before a second 20% decline.
Nonetheless, the media labeled March 9 as the birthday of the bull market because that is the day the U.S. markets hit rock bottom in 2009. You can try and Google it, but no credible source defines the start of a bull market at the absolute bottom of a bear market. The chart below shows what some would consider the “real” start to the bull market we are currently in—which didn’t begin until 2013.
20 Years of Ups and Downs
S&P 500 Index
There is a significant distinction between what the media, and what others, have pegged as the bear market birthday. This distinction—between a ten-year run, and one of only six years—can have a substantial impact on market psychology. Because let’s not forget, the stock market is driven largely by human behavior, and market cycles do not die of old age. These bull and bear cycles are initiated or killed by market sentiment and overall economic data, not the duration of the previous cycle.
So, let the media celebrate March 9 as the ten-year anniversary of low point of the bear market. The rest of us can cite March 28, 2013—when the market eclipsed the pre-crisis highs of October 9, 2007—as the “real” beginning of the bull market.
—Brant Jones, CFP®