The Bull Market turned 8 years old this week. It was born in the ashes of the Financial Crisis. Those days were simply brutal. I will never forget it. Selling was relentless. Panic was rampant. The system nearly failed. I’m a big believer that what doesn’t kill you makes you stronger. Investors that survived the crisis are mentally stronger. Those investors that use logic rather than emotion are financially stronger too. The S&P is up over 250% in 8 years. It’s the second longest Bull Market in history. It has to be the most hated and distrusted. This is such an important factor in understanding this current Bull.
The Market is like a living, breathing animal. Despite the evolution of trading systems and technology, the human element still exists. Emotions cannot be disregarded. Living through 2008 explains why nerves are still so shallow. The Financial Crisis brought so much pain to so many people. It’s unfortunate that so many investors that panicked at the bottom resisted getting back in and have missed so much of this multi-year rally. It reminds me of the Mark Twain saying about the cat and the stove. “If a cat sits on a hot stove, that cat won’t sit on a hot stove again. That cat won’t sit on a cold stove either. That cat just don’t like stoves.”
What is clear now is the 4-year run-up into 2007 was a Bear Market rally. Technically, it was a cyclical Bull Market within a secular Bear Market which began in 2000 when the dot.com bubble burst. That rally into 2007 was artificially inflated with cheap, accessible money that plowed directly and indirectly into real estate. Another bubble was created. The foundation was very weak. It was rotten at the core which led to collateral damage. The Financial Crisis was ferocious.
The Spring of 2009 was like the morning after a massive hurricane. The damage was severe, but not all was lost. Risk takers and go-getters began the process of recovery. Green shoots popped up amidst the rubble. Selling was exhausted. The Bear Market, which began in 2000, officially ended. The Baby Bull born on March 9, 2009 is healthy. It has been raised with so much support but possesses strong internal fundamentals. It’s been a volatile Bull, but it’s understandable why. Those that have bet against this Bull have lost time and again. This Bull won’t last forever, we all understand that. But this Bull showed signs of strength last year and has been rewarded in 2017.
We appreciate and respect this Bull. We do see more room for it to run, although the path has gotten a little slippery of late. Peaks and valleys are part of the terrain. As soon as we sense investors becoming euphoric about this Bull Market, we will change our tune. The economy and earnings growth are accelerating. Interest rates are finally rising for the right reason. This Bull just might make a record run of being the longest before it’s all said and done. In case you were wondering, the longest living Bull was 10 years, ending with the dot.com bubble in 2000. It gained over 400%. From a distance, they might look the same. But there is very little similarity between those Bulls.
Have a nice weekend. Keep an eye on that stove. We’ll be back, dark and early on Monday. Don’t forget to change your clocks.