Making Sense of the Longest Bull Market in History

On Wednesday, August 22 2018, the S&P 500 reached an all time high, and the current bull market made history by breaking the record for the longest bull market in recorded history.  The bull market turned 3,453 days old and surpassed the previous record that ran from October 1990 to March 2000. Since hitting the bottom of the financial crisis on March 2009, the S&P 500 has risen more than 300 percent. The index is up more than 7 percent in 2018 alone.

Interestingly, news reports and media outlets are at odds with one another on whether or not the record-breaking bull market is good news, or bad news. Some pundits are pointing to unbelievably high indices as a sign that things are only going to continue to get better, and that there’s only more growth in the future.

Others aren’t so sure. Some strategists have taken the approach that breaking the previously held record can only be a sign of the impending fall of the market, with the argument that it can’t possibly increase forever. Matthew Phillips of the New York Times made the argument, “Gains haven’t been spread among the masses,” and that during the recent bull market, “wealth inequality has increased significantly”. Certain groups of experts have also pointed out that the individual investor hasn’t played as large of a roll this time as they did in the 90s.

What does it all mean?
All of the debate and all of the back and forth about whether or not the record-breaking bull market is a good sign or a bad sign is missing the big picture. The truth is over the long term, the market trends in a state of growth. Since the inception of the S&P 500 in 1957 the market has trended upwards over the long term. Yes, there have been periods of decline, but those periods have always ended and turned back towards a growth cycle. The DOW Jones Industrial Average has also followed a similar pattern.

For those warning investors to err on the side of caution, believing a decline is imminent, it goes against what has been anticipated by the market. It also goes against the overall history of the market in the long term.

In periods of unanticipated decline to the market over the last 70 years, the initial impact sent the S&P 500 down by only a median of 2.5% during the ensuing day of trading. This includes social, economic, and political events like Pearl Harbor, the Cuban Missile Crisis, the OPEC oil embargo, the 9/11 terrorist attacks, and the Lehman Brothers collapse. With each one of these events, the bottom of the market was hit within six days of the initial event, and took an average of 14 days to recoup the loss.

The S&P 500, like any other index, may experience more fluctuation outside of unanticipated events. Based off 52-week lows and highs, the S&P 500 may experience a fluctuation of approximately 26%. A period that appears to be in decline could be market fluctuations and not signal an end of the bull market.

Planning is Everything
Because no one can predict exactly what the market will do, and brief periods of decline will almost always appear at some point, having a comprehensive plan in place is the best way to ensure you make it through. The record-breaking bull market is statistically significant, but positive and negative estimates about its future do not supplant the importance of balanced perspective and planning.

SC&H Financial Advisors will discuss the need for a Plan-B when the market takes a dip. Preparation in the event of a downturn is key. You should have between two to three years of accessible savings to cover living expenses during a decline. If you’re retired, this reserve is necessary to make sure you don’t have to make any significant lifestyle changes. If you’re still part of the workforce, a period of decline should have no bearing on an investment strategy.

When creating customized investment strategies, SC&H Financial Advisors can help you plan for the long-term. It may be better to embrace periods of decline because it enables you to accumulate stocks at lower cost with the thought that the market may again rise rather than panic sell any of your holdings.

A good financial advisor will always help in periods of anxiety and advise you to stay diversified and focus on the things you can control. This is why SC&H Financial Advisors has clients participate in “life boat drills.” These are conversations about preparedness, what to expect, and how to navigate the shift. They cover everything from portfolio to income impact for when the bull market eventually turns into a bear.

When investing, it’s important to have a partner you can trust. Someone who will help discern the truth from the attention grabbing headlines, someone who will customize an investment and planning strategy around your needs. After all, wealth management is the stewardship of your financial and emotional well-being. If you have any questions as you are navigating market activity or are in need of a partner you can trust please contact SC&H Financial Advisors.


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