This Is Not the Longest Bull Market Ever

By Path Financial President and Chief Investment Officer Raul Elizalde

bear and bull for blogMany media stories declared that the stock market broke the record for longevity on August 22, 2018. This would be quite an achievement if it were true. Alas, it is not.

As FINRA (the Financial Industry Regulatory Authority) has noted, the longest run belongs to the 12 1/2-year period running from October 1987 through March 2000. The current bull market, which started in 2009, will need to run through 2021 to break that record.

Part of the problem is that defining a bull market is difficult.

A bull market is loosely understood as a period during which stocks keep going up without falling more than 20%. What, then, are we to make of the period between July 16 and October 11, 1990, when the S&P 500 fell 19.9% from its peak? Some analysts round the plunge up to 20% and declare that day the end of that bull market, which then makes the current rally the longest. But those are not quite the “rules”, at least according to FINRA.

Another problem is that is not easy to define a “bear market” either. Does a bear market start right after the 20% decline is reached, or is it measured from the previous high? After the 20% plunge, most analysts backtrack to the day of the previous high and mark that date as the beginning of the bear market. But doing so leaves a weird intermediate period that is part both of a bull and a bear market, as in the graph below. So when does the bull market actually end?


All-time highs are perhaps more meaningful milestones. For the S&P 500, that was the close of 2872.27 on January 26, 2018 and it is still the highest at the time of this writing. But one could also make the case that such level should be adjusted for inflation, for example, or that the intra-day high, not the close, should be viewed as the record.

And whether the market index is really a good proxy for the whole market is hard to say, especially when companies like Amazon, Apple or Alphabet account for such large percentage of the index itself. The market index could be reaching a record level just on the advance of a few large companies, rather than on a general tide lifting all stocks.

The simple fact is that the stock market has been going up for quite a while, but no milestone was reached on August 22, 2018 that has any meaning – not more meaning, in fact, than when market indices reach a round number, like 25,000 for the DJIA or 2800 for the S&P 500. Those are just numbers.

A more important measurement may be the longevity of economic growth. According to the designation of expansions and contractions of the National Bureau of Economic Research (NBER), the U.S. economy has been growing since June 2009.

At 110 months, the current expansion is the second longest in the nation’s history, after the 120-month growth streak recorded between March 1991 and March 2001. The economy will have to grow past June 2019 to surpass it, and there are many questions about whether it can get that far.

Whether the stock market has gone up longer than ever is a question neither relevant not answerable with any precision. What is more important is that the longer it goes, the closer the time when it will meet its inevitable end.

Unfortunately, market participants tend to see higher prices and bull-market longevity as a sign that staying in the game is more important than protecting gains. This could be imprudent. Given that investors are at the mercy of whatever the market does, they should remember that not falling into complacency is one of the few things that they can actually control.


This analysis originally appeared in Raul Elizalde’s investment column. Click here to follow Raul on Forbes.


Raul Elizalde President Path FinancialRaul Elizalde is the Founder, President, and Chief Investment Officer of Path Financial, LLC. He may be reached at 941.350.7904 or

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Can the stock market triple by 2026?

damWe often hear these days that stocks are overpriced and due for a correction. Despite the fact that the S&P 500 is hitting all-time highs after climbing 250% in eight years, it’s clear that the rally has not quite captured the heart of investors. Analysts were never really convinced either and have issued similar warnings for years. Meanwhile, the bull market marches on.

Is it too late to join in? That is certainly a risk: it is a well-known fact that investors abandon caution at the worst possible times. But when the current rally is put in context with past performance, the case for extreme caution loses some of its potency. Stocks have been known to climb far more than the 250% registered since 2009, such as when they soared 1,000% between 1942-1966 and 1982-2000. Both rallies eventually died, of course, but false calls that the end was nigh were issued many times before the bull-slaying busts finally arrived.

Booms can be confoundingly persistent. The ten-fold rise from 1982 to 2000, for example, did not ebb gradually: instead, it sped up in the mid-1990s as investors became increasingly bullish and optimistic.

Conversely, busts come along with violence, often just after people stop recognizing that markets can do just that. In the late 1990s, for example, nobody could foresee the brutal 3-year bear market that started in March 2000.

Market crashes are a feature of how markets behave, and have always been around. The 2008-09 financial crisis or the 2000 dot-com crash, for example, were no more devastating than the Crash of 1929, or the long-forgotten Panic of 1873 that forced the first stock market closure.

These booms and busts come in unpredictable cycles of different duration. Nobody has a way of forecasting market turns.

But about 90 years ago an intriguing pattern of market behavior developed, and it has held remarkably well to this day. It goes like this: weak stock market returns in a 17-year period follow 17 years of very high returns, and vice versa. This might be nothing else than a coincidence, and we do not know whether it will hold in the future. But the cycle is quite clear.

can the S&P 500 triple chart

In 1929, for example, stocks had returned a remarkable 13.4% average in the previous 17 years, the highest it had been up until that point, and investors were euphoric. But in the next 17 years stocks yielded a miserly 1.3% per year including dividends. Fast forward to 1942: stocks had returned less than 4% during the prior 17 years but went on to yield a stunning 18% annual average return during the next 17.

Since then, the market pendulum has swung between despair and euphoria, taking market returns from trough to peak. It seems that just when optimism reaches its highest point a new era begins, marked by low returns, and affirming the dictum that investor sentiment is best seen as a contrarian indicator.

Despite the market strength, conditions today can hardly be described as “euphoric”. Political dysfunction, global terrorism, rogue states and the rise of global protectionism are just some of the concerns discussed in today’s news. Sentiment is rather weak, illustrated by the prevalent idea that the stock market is too high and ripe for a fall. And the past 17-year average market return has been low by historical standards.

So, according to the despair-euphoria cycle we described, current conditions seem to be consistent with strong future returns. If so, what would it mean for market levels?

The most conservative way of measuring this is to start the calculation at the trough of 2009. To arrive thus to a 17-year average total return of, say, 15%, the S&P500 would have to be around 7000 sometime in 2026, assuming dividends of about 2% per year. A 16% average annual total return would take it closer to 8000, or well above three times its current level.

This may sound unreasonably high, but as observed earlier the stock market has gone up much more than that in the past, and tenfold twice. Going from 700 in 2009 to 7000 in 2026 would not lack precedent.

Looking elsewhere for clues we note that the last 8 years saw weak economic growth, a condition proven to be cyclical; if so, we may be on the threshold of a new period of environmentally sustainable expansion aided by new technologies (think renewable energy and artificial intelligence). This could be a shot in the arm for the global economy.

We insist: it is impossible to know whether this pendulum-like cycle will hold. The stock market moves in patterns that occasionally repeat themselves for a while and then vanish, a feature common to unpredictable systems.

Even if the pattern holds, there is nothing to prevent the market from tanking and then recover to produce a strong 17-year average return by 2026. The 20%-plus Crash of October 1987, for example, happened five years into the tenfold stock rise of 1982-2000.

So the cycle we described does not say anything about where the market may be this year or the next. But those who wonder about the long term may find the idea of being in the initial stages of a really long rally quite exhilarating.

What now?

We are a Registered Investment Advisor held to a fiduciary standard of care. We believe that our portfolio management process, focused on measuring and managing risk, can be very effective at creating a sensible balance between risk and return, partly by measuring financial and investment conditions often and adjusting portfolios through a well-defined process. We implement this process for our clients and we tailor it for their specific circumstances, and we always put their interests first. That means we do not profit from transactions or by selling any products. Our only compensation is based on the assets we manage, which goes a long way of aligning our interests with yours. We can also help you evaluate your current goals and establish an investment plan aiming at steady, long-term returns while managing downside risk. You can download our report describing our investment methods and goals, or contact us if you would like to know more about how Path Financial’s investment process can work for you. We’ll be happy to set up a confidential meeting to discuss your path to financial success. Contact Path Financial at 941.350.7904.

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Bulls and bears fight it out

After two years of virtually uninterrupted gains, the stock market took a scary tumble in  October. Opinions are highly divided on what this means.

The bulls think that the dip is a buying opportunity because the economy is strong and  the Fed’s ongoing stimulus places a bottom on asset prices. The bears say that the economy is vulnerable to serious global challenges against which the protection that Fed policy supposedly provides will come short. The fight between the sides is closely contested, and investors are caught in the middle. Erring on the side of prudence may be the way to go. Read the full report

Written by Raul Elizalde

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Some love for the most unloved bull market in history

A recent Standard & Poor’s report confirms that investors were net sellers of equity mutual funds from early 2009 through late 2012, even though the S&P 500 climbed more than 50%. But since the beginning of 2013 they have been net buyers, even though amounts have been modest and participation inconsistent.

Some observers argue that, as always, investors are coming in too late, lulled into a false sense of security by high prices and low volatility. In this mindset, this is a proverbial “calm before the storm” – nothing but a trap. Are they right?

We don’t think so. By one measure, the market may be at the beginning of a healthier phase. We know this is hard to believe. (Read more)

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