We May Be Approaching the Longest Bull Market in History

We May Be Approaching the Longest Bull Market in History

As we’ve previously noted, records are meaningless. Still, we’d rather be living through the longest bull market in history than the longest bear market — and that seems to be on the verge of happening.

If the market can remain bullish for a couple of more months, a new record will be set. Based on recent reports, a new record should be on the books by summer’s end. While profits may not beat first quarter results, which were jacked up by some one-time benefits related to tax reform, as a headline in The Street put it, “Second-Quarter Earnings on Track for Massive Growth, So Relax Wall Street.”

Bull Markets since World War II. *Still in progress.

“We think the bull market can break the all-time record for the longest ever,” according to Ryan Detrick, senior market strategist for LPL Financial Research. “With strong corporate profits, decade highs in manufacturing and services, and 40-year-plus lows in initial unemployment claims, we simply aren’t seeing recessionary indicators to suggest that the bull is coming to its end.”

A few things to note, though, about the life cycle of this current bull:

  • The Federal Reserve Board manipulated the markets during the Obama years. So did high-frequency traders, as Michael Lewis documented in his book Flash Boys.
  • The Federal Reserve raised interest rates 0.25% on Wednesday, to no one’s surprise, and signaled that two additional increases will take place this year. You may have read that the move “roiled markets,” but we wouldn’t consider a 0.24% drop in the S&P 500 a roiling.
  • The big news, which isn’t all that big, is that the Fed is planning to raise interest rates four times this year, instead of three. That’s because the market is so strong, the Fed is concerned that it is overheating. In the minds of some politicians and Wall Street pundits, it’s actually bad news that we have more job openings than people to fill them.
  • Keep in mind that, even with a fourth increase in interest rates this year, rates will remain below normal. So how much do you think they’re likely to restrain corporate investment and expansion, especially given that corporations have lower taxes and fewer regulations to deal with than they did during the Obama administration? Maybe higher rates will even help keep housing prices from continuing to rise.
  • Some believe the current bull market is mostly bull. They even claim that it didn’t begin until February 2016. MarketWatch columnist Mark Hulbert noted that the S&P 500 dropped more than 21% in 2011 and that the Value Line Geometric Index and the Russell 2000 index each fell by more than 25% between May 2015 and February 2016.

So we may be setting a record for the longest bull market in history or we may not. Regardless, markets seem to be operating more rationally today and, while interest rates may be rising more than expected, Fed Chairman Jerome Powell has said a normal level “could allow the Fed to soon step back and play less of a hands-on role in encouraging economic activity.”

That sounds pretty bullish to us.

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