Reviewing History’s Most Hated Bull Market

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As a further thank you, I am providing what I hope is a highly useful weekly update.

The bull market that few people expected to last set new records this week. Now is a good time to assess the numbers.

This is the second-best bull market of all time in both total return from the bottom and duration. Only the bull market that began on December 4, 1987, and ended on March 24, 2000, exceeds it on both counts. Since its beginning on March 9, 2009, the S&P 500 has risen 267.61%. It has lasted 3,108 days. But it’s still a long way from achieving top status. It needs more than another 1,300 days to set the duration record and has to almost double again to rival the return of the market over the 13 years that began in 1987.

Note: Different sources give different numbers about bull market records. Some use different indexes, with the Dow Jones Industrial Average probably being the most cited. Some include dividends to tabulate total return, while others measure only the change in the index. Since there is no formal definition of a bull market or a correction, some use different starting and ending dates. So, you’ll see different specifics from some other sources.

We’ve also gone a long time without a correction of 10% or more, but we’re nowhere near a record on that count. We’ve had only the 11^th-longest rally in the S&P 500 since the last correction. The last correction ended on February 11, 2016. That was more than 580 days ago, and the index has added 35.97% since then.

There also hasn’t been a 5% or greater correction in more than 441 days, which is sixth-best on that score. And it has been about 315 days since the last decline of 3% or more, which is second-best.

You can see why investors are complacent, and there are good reasons not to expect a decline in U.S. stocks for a while.

A good measure of the market’s momentum is the 200-day moving average. When a market is well above the 200-day moving average and climbing, that shows strong momentum and the trend is likely to continue. Traders generally don’t worry about a market until it starts to fall below the moving average. This market has been above the 200-day moving average for about 310 days and is well above the moving average line. The last time it fell below the moving average was during the sell-off following the Brexit vote in June 2016.

Even if the S&P 500 were to fall below the 200-day moving average, I wouldn’t worry unless it is accompanied by changes in the fundamentals of the economy. In the past, after the index fell below the 200-day moving average following an extended rally, the index was substantially higher three months later most of the time. It takes a lot to shake strong, established momentum.

The Data

Small business owners continue to have positive outlooks, as measured by the NFIB Small Business Optimism Index. It rose a tenth to 105.3. That puts it just below the 12-year high set early this year in the post-election euphoria. Business owners expect higher sales and plan to make capital expenditures. Even so, five of the 10 components of the index were negative, and earnings were the most negative of the components.

Producer Prices rose a modest 0.2% (0.1% after excluding food and energy) after a small decline last month. The 12-month change is only 2.4%, and is 2.0% after excluding food and energy.

The Consumer Price Index, however, exceeded expectations for the first time since February. The CPI rose 0.4% for the month, 0.2% after excluding food and energy. For 12 months, the CPI is up 1.9% and 1.7%, respectively. That puts the CPI close to the Fed’s inflation target. But the Fed really wants to see inflation above 2% for a while. It also wants other inflation indicators, such as the PCE Price Index, to rise to that level.

Inflation isn’t yet a reason for the Fed to raise interest rates.

Consumers continue to increase borrowing at a modest rate, according to the Consumer Credit report. As during most of this recovery, consumer credit rose but most of the increase was in student and auto loans. Credit card debt increased, but at only half last month’s rate. That shows consumers are spending, but more carefully than before the financial crisis. We’ll learn more in tomorrow’s Retail Sales report.

The JOLTS (Job Openings and Labor Turnover Survey) confirms that the labor market is strong. This report is more detailed than the monthly Employment Situation reports, but JOLTS is a month behind those reports. Job openings increased 0.9%, which was more than expected. Hirings increased 1.3%. But the number of hirings still lags the number of new job openings. That means employers aren’t able to hire the workers they want for the positions that are open, which has been the case for several years. This should cause wages to rise, but compensation increases have been modest so far.

New unemployment claims declined by 14,000. That’s a surprise, given that many claims are expected to be filed because of the hurricanes. The claims number is likely to be volatile for a while because of the hurricane effects.

The Markets

The S&P 500 returned 1.36% for the week ended with Wednesday’s close. The Dow Jones Industrial Average surged 1.65%. The Russell 2000 rose 1.79%. The All-Country World Index added 1.47%. Emerging market equities gained 1.50%.

Long-term treasuries declined 1.21% for the week. Investment-grade bonds lost 0.40%. Treasury Inflation-Protected Securities (TIPS) fell 0.21%. High-yield bonds returned 0.07%. Plus, the dollar finally gained, rising 0.29%.

Energy-based commodities fell 0.14% for the week. Broader-based commodities lost 1.01%, while gold fell 0.78%.

Bob’s News & Updates

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Some Reading for You

Failure to update their views and knowledge is the most common mistake of investors, according to this article.

You might want to read this article about how to protect your financial identity from theft.

Markets don’t care much about politicians or election results, as this article shows.

I comment and link to these and other items on my public blog.