How Long Can This Bull Market Last?
Will 6 years prove long enough?
Presented By: Randy Williams-Gurian
If we knew the answer to this question we would all be very happy and would use this information to our advantage when making client investment decisions. Unfortunately investing is both an art and a science, and we work very hard to balance those two aspects for clients. We also know that the markets go through bull and bear market cycles. Bull market cycles tend to last longer and are generally much more pleasant than bear market cycles. Bear markets last on average 14 months and the average decline is 25 percent. The nice thing about bear markets is that they end. The last bear market ended on March 9, 2009 which is when equity prices bottomed as a result of the Great Recession. Investors experienced a 30-40 percent drop in their portfolios during the Great Recession.
The reason for the history lesson is simple. The 2008-09 bear market is likely the worst market decline this generation will experience in their lifetime and it also sets the stage for an extended bull market cycle. According to Jeremy Siegel at the Warton School of Business, who is one of the few on Wall Street who predicted this current bull market cycle, the current market cycle could continue for another 4 to 5 years if history is any guide. In addition, the gains, while still positive, likely will not approach the average gain in equity prices over the last five years which Siegel calculated were 15.8 percent through 2014. According to his research dating back to 1871, stock price gains over the next five years could average 7-9 percent, and this would allow equity prices to revert back to their long term average growth rate.
Who said going through a bear market is a bad thing? If you were fortunate enough to have stayed the course during this very difficult time, your portfolio was handsomely rewarded and now is not the time to jump ship.
Published: February 2015
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