By most accounts, the current bull market will turn 9 years old this Friday (March 9). A few holdouts will say its birthday was actually yesterday because March 6, 2009, was the day the bear market hit its lowest intra-day low (the infamous 666 for the S&P 500!).
Given the disagreement, I figured I’d split the difference and note it today.
You may wonder who decided that a 20% decline equals a bear market in the first place. Jeff Hirsch of The Stock Trader’s Almanac tackles that question and points out that some arbiters of such things don’t buy into that definition. The widely-respected Ned Davis Research firm, for example, changes the percentage drop required for an "official" bear market based on the length of time it takes for the decline to take place.
A Bear Market requires a 30% drop in the Dow Jones Industrial Average after 50 calendar days or a 13% decline after 145 calendar days. Reversals of 30% in the Value Line Geometric Index also qualify. This applied to the 1987, 1990 and 1998 high and low.
This helps explain why I’ll occasionally write things like, "Depending on how you measure it, corrections happen every 12-18 months, on average." Not everyone agrees with the commonly held definitions!
Does any of this matter? Yes and no. No, from the standpoint that bull markets don’t die of old age anyway so their length doesn’t tell us anything directly about their future prospects. Yes, from the standpoint that it gives us a historical perspective regarding how normal or abnormal a particular market move is.
Using the more nuanced definition of a bear market quoted above, there have actually been two of them since March 2009! There was one in 2011 (which registered as a near-miss on SMI’s Bear Alert scorecard), and another in 2015-16. Using that definition of a bear market, the current bull market is barely over two years old. If that’s the case, it’s seemingly easier to make the case that it should have further to run, which is precisely what Hirsch does at the end of his article linked above.
Ultimately, the age of this bull market matters a lot less than the conditions supporting it. Chief among those are stock valuations, which by nearly any measure are as high as any time in history except the very end of the 1990s technology bubble. At the risk of sounding like a broken record, those valuations don’t tell us much about the immediate future, but they tell us quite a bit about what to expect over the next 7-12 years. Namely that from these valuations, long-term stock market returns are bound to stink. That almost always takes the form of a significant bear market decline sharply lowering those valuations at some point.
As most of the investing world celebrates the start of this bull market’s 10th year this weekend — and as you likely see charts showing its length surpassed only by the long 1990s bull market — you’ll know the rest of the story. Regardless of how you count its age, there is plenty of reason to be leery of this bull market. Yet as the last year has vividly demonstrated, high prices don’t mean the market can’t charge higher still.
