4 Reasons to Stay Bullish About this Bull Market

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The bull market that began in March 2009 has eclipsed almost every other bull market in history in the two most important ways:

  1. Length of time – As of July 8, 2017, the current bull market, as measured by the S&P 500 performance, has lasted 100 months, surpassing all but one other period since World War II (October 1990 – March 2000)*
  2. Cumulative rate of return – At 255%, only two bull markets have gone further (October 1990 – March 2000 and June 1949 – August 1956)*

Although it is exciting that investors now have something to celebrate after the credit crisis of 2008, confidence in this continued success begins to erode with the passage of time. The saying, “You can never have too much of a good thing” is usually followed by, “Nothing lasts forever.” In context of the current scenario, this leads investors to wonder when this bull will expire.

The good news is that I believe there is room for this expansion and the bull market to continue. Here’s why:

  1. Business cycles are not like the earth’s orbit around the sun. They are not all similar, and in general, business expansions are getting longer and downturns are getting softer. This could turn out to be the longest expansion since the previous longest (1990s) of 10 years.bull
  2. The announcement of the reduction in the Fed balance sheet is important. Keeping rates too low for too long could result in asset bubbles, due to borrowing and spending driven by what economists refer to as too much “easy-money.” Unwinding the loose monetary policy allows for future stimulus when it is needed to combat the next recession. (Of course, unwinding too early also carries its own risks.)bull
  3. . The global economy is poised for the best nominal growth (5.7%) in six years, if current expectations play out. Correlations between earnings per share and nominal gross domestic product growth are higher, meaning higher growth should lead to higher earnings and higher stock prices. Strength in economies around the world is beneficial to the United States.bull
  4. Diversification helps you to win by not losing, but staying invested is crucial, because history shows the compounded effects of the market builds wealth over time.bull

A word about pullbacks

The case for a continued expansion and bull market are sound, but I would be remiss not to point out that pullbacks are inevitable (and we believe the likelihood of a pullback is rising) and never announce their arrival.

What should your clients do?

Putting it all into perspective, sage advice for your clients would be to invest:

  • Keeping their goals in mind
  • According to their risk tolerance
  • Within context of their goals
  • Relying on a fully diversified portfolio

And, most importantly, don’t overthink it… stay invested consistent with your risk tolerance and long-term goals.

*Source: SEI

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John Frownfelter

John Frownfelter

John Frownfelter is the investments contributor for Practically Speaking and the managing director of investment solutions within the SEI Advisor Network.

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  • http://www.removetheguesswork.com IntegWealthNick

    “Diversification helps you to win by not losing.” Well put.

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