How long can this positive streak continue?

For 9 straight calendar years, the US stock market has gone up, with no down calendar years, as measured by the S&P 500. The S&P 500 is an index of 500 of the largest publicly traded companies based in the US.

By some people’s measure, on August 22, this will become the longest bull market in history, at 3,453 days.*

Should you be concerned about this 9 year positive run?

When will it end?

Is the US market heading into a bear market, which is defined as a decline of over 20%?

Let’s define a few things and give some perspective to these issues.

While the above statistics are accurate, the broad US Stock Market has not gone straight up during the past 9 years. There have been a number of major declines during this period.

  • From the Spring, 2011 to September, 2011, the S&P 500 dropped by almost 20%, depending on how it’s measured.
  • From May, 2015-February, 2016, US markets dropped around 14% and International markets and many individual stocks did far worse.
  • In early 2018, stocks dropped about 10% in less than two weeks, then again began their ascent to record levels.

Thus, while the chart below of the last 10 years of the S&P 500 shows a picture that generally looks like an easy ride, actually living through it was much more difficult.**

If you look at the S&P 500 chart of the last 12 months, you will see there were lots of up and downs…it wasn’t all smooth sailing…there have been plenty of choppy waves to deal with. **

What these pictures reflect is the benefits and importance of our long-term view of investing. Despite some significant down periods, if you remained disciplined and patient through the bleak years of 2008-09, and some of these down periods of the last 9 years, you have been very well rewarded.

As clients and long time readers of this blog know, we do not advise investing only in the S&P 500. Over the long run, a more diversified global portfolio has outperformed a portfolio of only the S&P 500. This more diversified portfolio, as we recommend, would also include small companies in the US and companies of all sizes around the world.  Please see this prior blog post, for more information on the benefits of global diversification.

Despite the long positive run of stocks, there will be a “next” downturn and many to follow that one. There have been articles in the media trying to identify what the cause of the next market downturn will be. There are always forecasters predicting imminent doom and the next crash.

None of these predictions will help your financial future. No one can accurately predict the future. No one can accurately and consistently time when to get out of stocks and then predict exactly when to jump back in at the bottom. The winning strategy is to remain invested in stocks, in an allocation that makes sense given your specific situation and goals.

While we do not see a crash of 20% or more in the very near future, the history of stock investing tells us that you need to be prepared for this to occur.

As we like to remind our clients, declines are an expected part of investing in stocks, which often occur when we don’t expect it. For example, US stocks have had a 20% or significant decline at least once every 5 years since World War II. If you count 2011, this still holds true.

A significant decline is not an if….as it will occur….the real question is when it will occur. There will be a major decline in the future, whether it is within the next 1, 3 or 5 years. After that, stocks will eventually reach new highs again at some point in the future.

If a major decline concerns you, there are things you can and should do. You should discuss this with us, so you and your portfolio are prepared for this eventuality. If you are financially comfortable and are still concerned or want to avoid some of the decline, then you should consider reducing the stock allocation of your portfolio now.

If you think the bull market will come to an end and you are more focused on preserving your capital, then you should be making changes to your investments…, not when you “think” the bull market will end. For example, if you are in retirement, are “set” financially and don’t need to take major risks with your investments, then now is the time to talk and take preventative action. Now is the time to plan and implement how to re-allocate some of your portfolio if you want to lessen the impact of the temporary losses that will occur in future downturns.

If you are younger or need to be more invested in stocks for the long term to be able to reach your financial goals, then you need to be emotionally prepared for the temporary downs and ups that will occur within your investment portfolio.

The keys are…..

Markets will go down.

That should be expected.

When they will go down is often unexpected.

Markets will eventually recover and reach new highs again….we just don’t know how long that will take.

If dealing with these decline concerns you, or you are more focused on capital preservation, then you likely have a greater stock allocation than you should have. You should talk to us to review how you should modify your portfolio.




*Zerohedge, Get the champagne out For US stocks:  In 14 Trading Days This Becomes The Longest Bull Market Of All Time , Tyler Durden, 08/03/2108,
**S&P 500 indices, per screenshots for the 10 years and 1 year period ending August 8, 2018, respectively.
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