Putting the Bull Market Into Perspective

The stories are starting to appear in the press again. We read and hear them every time the market makes a bullish (upward) move. They all sound similar and usually have the phrase “the market is moving too far too fast,” or “this is the longest bull market in history; it can’t last.”

To anyone saying or thinking something similar, it’s to you that we are writing this week’s newsletter.

Recently, we read an article called “Anatomy of a Bull Market” by Just Sibears. While you can, and should, read his article, we will summarize a few key points that we would like our readers to know.

BULL MARKETS

Regarding the current bull market, which started in March of 2009:

  • This is currently the 7th longest bull market and 6th strongest in history.
  • For it to become the longest in stock market history, it will need to continue through the 4th quarter of 2023 (That’s another 5.5 years!).
  • For it to be the strongest, in terms of largest returns, it must return another 665%.

Regarding Bull markets holistically:

  • The average bull market lasts 8.1 years
  • The average total return is 387%
  • The typical annualized return is 15%
  • There has not been a market cycle with a single-digit annualized return.

Think about those statistics for a minute, because they are incredible! They are also something that you would never hear in the mainstream media.

For those of you worried about this bull market ending because it’s gone “too far too fast,” relax. It has actually been a normal bull market, in terms of length. As for returns, it’s been slow.

BEAR MARKETS

Now, for those of you worried about a bear market completely destroying your life, here are some interesting facts about bear markets.

  • The average bear market lasts 1.5 years
  • The average loss is 35%
  • The longest bear market was during the great depression—it lasted 2.8 years. The second longest was the financial crisis of 2008—it lasted 2.5 years.

Bear markets are short and fast, but they cause a lot of hurt from a psychological perspective. The scars of 2008 still linger. Many of these scars/fears drive people to fear the worst, rather than to plan for the norm. The key is to look at the big picture to see how both bull and bear markets can impact your investment goals. From there, you can invest—and NOT invest—accordingly.

Our role as portfolio managers is to help people understand the impact that bull and bear markets can have as they save to accomplish their financial goals. For instance, with every bear market comes an opportunity. Though markets were down in 2008, our all-cap portfolio went up by 29.76% in 2009*. With proper saving and investing habits, diligent investment in quality companies, and patience with the market, financial goals are met and surpassed—yes, even following bear markets.

To those of you anticipating the end of this bull-run, I hope that I have eased your worries. But more than this, I hope that I have given you a newfound optimism for the next bear in our market cycle.

Here’s to wise investing,

Brett

For those of you who are more visual, you can check out a similar bull/bear market study that was done by First Trust.

*Past performance is not indicative of future returns. For more on our historical track record, click here.

What We’re Reading

Is Your Financial Advisor Acting in Your Best Interest. This is a HOT topic right now, but it’s certainly not a new topic. We, at Iron Gate Global are a Fiduciary. This means that we are legally bound to act in our client’s best interest. Surprisingly, not all advisors are. In fact, the big firms like Merrill Lynch, Fidelity, and TD Ameritrade who pushes clients into Amerivest portfolios, are not. This article points out something very important, you’ve got to find an independent Fiduciary as an advisor. If you don’t, you never know what may be happening behind the scenes.

Howard Marks on Forecasting and Cautious Investing. Every time Howard Marks speaks, we listen. He is a fantastic investor and someone to learn from. In this video, he discusses a few important things; where the market stands now and the inability to forecast where the market is going to be in the future and preparing for what you don’t know. This is must watch T.V.!

The Buffett Formula: How to Get Smarter. If you want to become a smarter individual, this article will tell you how to do it, Buffett style.

Categories: Markets.