The stock market's astounding surge from the depths of the Great Recession is hitting a major milestone: It's the longest bull run in modern history.
This surge, which earlier this year turned nine years old, has been going strong for 3,453 days and has surpassed the famed dot-com 1990s rally which ultimately ended with the bursting of the tech bubble in 2000.
Famed investor Benjamin Graham, author of
The Intelligent Investor, once said, ”In the short run, the market is a voting machine but in the long run it is a weighing machine,” meaning that voting machines count sentiments or opinions, which can change at any given time. Weighing machines, on the other hand, can measure value more accurately.
Nine years carries a lot of weight.
What is a bull market? And when did this one start?
Depending on who you ask, you might get different definitions and dates when this current bull market started. And that’s because since they’re so difficult to predict, they’re not recognized until they’ve happened. Broadly speaking, stocks are considered to be in bull markets when prices rise by at least 20%, following a 20% decline.
For the sake of argument, let's use the most widely-accepted measure of a bull market, which is the lowest point of the previous bear market to the highest point of the bull market. In this case, the bottom was reached on March 9, 2009 — a time when the world’s economy, not just stocks, was on the verge of total collapse. On that day,
the S&P 500 Index touched a low of 666 and The Wall Street Journal, predicting the Dow could fall to 5000, asked, “ How low can stocks go?”
Warren Buffett at the time said that the economy had “
fallen off a cliff,” but would recover. “Things will get better, eventually,” he said. “Just a question of how long it takes. But America has always pulled together in the past and will do it again.”
Buffett made those comments to
CNBC on March 9, 2009. And it would seem equities haven’t stopped climbing since. Just how significant has this bull run been?
Opportunistic investors who jumped in at the lows of 2009 have benefited from a combination of factors, but most notably a decade of record-low borrowing rates. Seeking to prop-up the hard-hit economy, the Federal Reserve ushered in an era of easier access to capital, which was applauded in some circles and prompted Citigroup's chief equity strategist to predict the S&P would hit 1,000 by the end of 2009. He was right. The S&P ended 2009 with more than a 60% gain, closing out the year over 1,100.
Nine years following the bottom of 666 on March 9, 2009, the S&P 500 reached an all-time high of 2,872 this past January. If you had invested $10,000 on March 9, 2009, your investment would be worth $42,250 today, returning some 320%. Meanwhile, with a gain of 306% (factoring its January high of 26,616), the
Dow Jones Industrial Average has experienced its greatest percentage gain since World War II, according to research firm Leuthold Group.
With a gain of more than 500%, the tech-heavy
Nasdaq Composite, which on March 9, 2009 fell to a 12-year low of 1,268, has been the biggest winner. Thanks to the rise of FAANG — Facebook, Amazon, Apple, Netflix and Google — Nasdaq is on the verge of breaking 8,000. Remarkably, the indexes have attained record highs despite enduring arguably more obstacles than prior bull markets.
Despite fears of a trade war, rising interest rates, renewed currency concerns, political uncertainty around mid-term elections in November, and questions around future growth prospects, the U.S. equity market has been steadfast in its ascent.
When will this current bull run end?
But when will this bull run end? Well, that’s been the prevailing question ever since it started. And that question won’t go away until the S&P 500 suffers a 20% drop. The sustained rise in stock prices has many investors concerned about not only high valuations, but the likelihood that future returns will be muted. At the same time, there are quite a few reasons for investors to expect that the strong revenue and earnings results seen over the past nine-plus years can continue.
As the market watches out for a correction, corporate revenues and profits continue to rise. Strong economic growth and a wave of share buybacks are providing the tailwinds necessary to keep the bulls firmly in control for now. Aggregate revenue of the 90% of S&P 500 companies that have reported second quarter revenue results have increased by 10% from the year before,
according to FactSet Research. Some 80% of S&P 500 companies have surpassed earnings estimates, while 72% have beaten revenue estimates.
The positive economic trends are such that it can keep the bull market intact for the foreseeable future, according to billionaire hedge fund manager
Leon Cooperman of Omega Advisors. While acknowledging stocks are either "fully or fairly" valued, Cooperman said, "the conditions that normally lead to significant market decline are either not present or not forecastable.”
Cooperman's sentiment was echoed recently by Dan Suzuki, senior U.S. equity strategist at Bank of America Merrill Lynch (BAML), who
told USA TODAY, "We still think there is further upside for the market.” Meanwhile, Suzuki’s counterpart, Stephen Suttmeier, also with BAML, believes the S&P 500 could test 3,000 as early as 2019, according to MarketWatch. Bottom Line
If remains to be seen whether Cooperman, Suzuki or Suttmeier will be proven right. But as the debate rages on between the bulls and the bears, it’s worth noting that bull markets
don’t die of old age. They are instead killed off by excesses, as prior eras have demonstrated. But while the “good excesses” such as corporate revenue and earnings, continue to outpace rising rates, inflation and overconfidence, among other hazards, it’s conceivable this bull has room to run.