Stock Market Bull Run Celebrates Fifth Anniversary

By
A A A

The stock market bull run celebrates its fifth anniversary this week. SPDR S&P 500 ( SPY )rocketed 181% from its bear-market trough of $67.10 a share reached on March 9, 2009.

PowerShares QQQ ( QQQ ), tracking the 100 largest nonfinancial stocks on the Nasdaq, vaulted 197%.SPDR Dow Jones Industrial Average ( DIA ) flew 132%.

The smaller the companies, the bigger the returns. SPDR S&P MidCap 400 ( MDY )soared 238%, while iShares S&P SmallCap 600 ( IJR ) blasted 264% higher.


"It stands as the second-strongest bull market since 1942 at the five-year point, trailing only the 1982-87 bull market," Randy Frederick, managing director of trading and derivatives at the Schwab Center for Financial Research, said in a note Monday.

The best five-year stretch kicked off in August 1982 and rallied 225%. This time around, the gains were fueled by the Federal Reserve's bond purchasing program, record-low interest rates and massive corporate share buybacks plumping earnings per share.

"Five years ago (the consumer confidence index) was at a record low level of 25 before bouncing back to 78 today, while unemployment was 8.3%, on its way to 10%, before dropping to a recent 6.7%," Todd Rosenbluth, director of ETF and mutual fund research at S&P Capital IQ, said in an email. "Meanwhile, during the fourth quarter of 2013, S&P 500 index earnings per share have reached a record $28.45."

The stock market appears stretched as SPY in early 2013 flew past its October 2007 pre-financial crisis high and now trades 20% above that peak on a nominal basis. But when priced in 2007 dollars, its prior high would be valued at $177.40 a share. So on a relative basis, SPY has surpassed its 2007 apex by only 6%.

Foreign developed markets lagged the U.S. in the face of Europe's debt crisis and Japan's two-decades-long economic malaise.IShares MSCI EAFE Index (EFA), tracking developed foreign markets, pales in comparison to the U.S. 94% gain.

Emerging markets outperformed all global markets early on as the Federal Reserve's easy-money program prompted investors to pursue more risk in higher-growth markets and higher-yielding currencies. But the party ended last year due to a perfect storm of events that included falling commodity prices, currency devaluations, rising trade deficits and worries over the Fed scaling back stimulus.

Spin-Off ETF Soars Fivefold

Guggenheim Spin-Off (CSD) made its investors 415% richer from the bottom of the bear market by investing in companies that were broken off from a parent company. The index tends to have less volatility than the S&P 500 and typically holds midcap stocks, said Andrew Corn, CEO of E5A Integrated Marketing in New York.

He created the underlying index and launched the ETF in December 2006 as Claymore/Clear Spin-Off ETF, before Guggenheim acquired Claymore. Corn said his research, using back-tested data going back to 2001, showed that spinoffs outperform the market.

"Management, with incentives fully aligned with shareholders, is free to run the company to their vision," Corn said in an email. "This is without a parent company looking over their shoulders or placing priorities, relationships, financing decisions on the subsidiary made at a higher level."



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , ETFs

Referenced Stocks: SPY , QQQ , DIA , MDY , IJR

Investor's Business Daily

Investor's Business Daily

More from Investor's Business Daily:

Related Videos

Stocks

Referenced

Most Active by Volume

33,110,376
  • $113.99 ▲ 1.77%
25,034,179
    $17.98 unch
24,486,872
  • $7.41 ▲ 2.07%
20,864,535
  • $7.39 ▼ 2.76%
18,600,501
  • $8.30 ▼ 0.36%
17,530,211
  • $8.14 ▲ 3.17%
17,299,208
  • $93.79 ▲ 2.74%
14,669,760
  • $25.78 ▼ 0.19%
As of 12/26/2014, 04:15 PM


Find a Credit Card

Select a credit card product by:
Select an offer:
Search
Data Provided by BankRate.com