This Week Marks The Start Of The Longest-Running Bull Market In History

Look who’s turning ten! This week marks a decade since the market’s bottom in March 2009, and the start of the longest-running bull market in history. Happy birthday, bull.

As you no doubt recall, the years of 2008 and 2009 were characterized by a global financial crisis that leveled massive financial institutions and prompted a plethora of bank stimulus efforts unlike any before. We lived it; we remember. As investors, we were on needles and pins as we charted this new and unknown territory.

But, what’s also worth noting is how this most recent decade turned out to be so very typical for investors. We can learn some lessons from the Decade of the Bull.

Here are three important concepts that the rally and continued health of the market illustrate.

1. Don’t let fear take over when things look dire. This would have been in 2009 and at other points when the market dipped. Sure, there were dozens of times when you fear could have prompted you to cash out of the market. But those who weathered the storm and remembered that time in the market beats timing the market have benefited royally.

For perspective, on March 9, 2009, the S&P 500 bottomed out at 676.53. In the years since then, the S&P has rallied a whopping 312%. Running the numbers, the index has delivered a 10-year annualized total return of 17.8%.

If we look back at previous years, these figures closely correlate to the annual gains (including dividends) realized by the S&P 10 years after the October 1987 market crash (17.2%) and after the vicious bear-market trough of September 1974 (15.6%).

2. Pullbacks and corrections are part of bull markets. Having the fortitude to get invested or stay invested when stocks look dismal has, to date, rewarded investors with returns roughly 1½ times as good as the long-term average. Sure, there are dips and drags. But, no matter how emotionally harrowing, that’s part of market investing.

Remember, the S&P 500 dropped 20% from September 20th to Dec 24th of 2018. On a closing basis, it fell 19.8% to be exact. And we had a tumble of 20% at one point, which took us beyond correction territory into a bear market. Yet today, we are still coasting along in a bull market; the market is cooperating, having recovered all but about 4% of the late-2018 losses in a steady ten-week march higher.

As further evidence, when the trailing 10-year return gets up to the area discussed above, it generally means a bull cycle is far along but hasn’t necessarily made its final run. For instance, if you had bought into the S&P 500 when the trailing return was close to its current level in 1984, 1992 or 1997, you would have experienced up to three years more time before another significant decline hit. Although the forward 10-year returns from those entry points were indeed lower (7 to 14 percent a year), they were still positive. And, after all, investing is a marathon, not a sprint.

3. Don’t let politics drive your investment decisions. Since the collapse in 2009, we have cycled through two presidents. And we have realized the gains we outlined above. Still, some folks let politics cloud their judgment when it comes to investing.

In my professional experience, politicizing the economy is typically not a good move. When we let our emotions get the best of us, we tend to invest irrationally.  Some people have had a viscerally negative reaction to the Trump administration; other folks felt pretty much the same thing when Obama was in office. Those who didn’t like our former President couldn’t admit that, during Obama’s time in office, the economy was doing well. The same thing is happening today.

When investors politicize the economy, they risk losing out on growth. I’ve seen it happen to both Republicans and Democrats. I’ve seen it happen when the politics indeed had nothing to do with the economy. Turning back to Obama, when he was elected again in 2012, the S&P was up about 32%. If you let your distaste for our President at the time guide your decision-making and just stayed in cash, you missed out. If you let your dislike for our current leader sway your investment decisions, then you too could miss out on the current gains.

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