10Sep

S&P 500 – LONGEST BULL MARKET IN HISTORY

Strong economy, strong market; that seems to be the rational that can explain the market surge as of late. The S & P actually hit an all-time record high on August 24, 2018. The Nasdaq Composite followed suit. The market’s gains were broad-based.

Running for the past nine and a half years, the Standard and Poor’s 500 Index has risen 325 percent. In that time, the Dow Jones Industrial Average is up 294 percent and the Nasdaq Composite is up 526 percent.

This year, the Dow had been in correction territory for around six months and emerged from it on August 27. This was the longest stretch of days at these levels since 1961. The market had entered correction territory on February 8. On August 27, the Dow hit 26,049.

There are some analysts on Wall Street who argue that the bull market of the 1990s remains the longest bull market. Some others argue the exact date when the current bull market began. But, most agree that on August 24, the market hit a record.

Part of the success of this long market can be attributed to good monetary policy in past years and great fiscal policy currently.

This Year’s Market

When even the Federal Reserve says that the economy looks “strong,” then Wall Street feels compelled to push the market higher. And, that is what has happened. The Fed also stuck to their guns and kept to a modest rate increase projection for the balance of 2018. The fact that the fed chair did not take a more hawkish position told Wall Street that inflation remains largely under control.

Good corporate earnings, a pro-business environment and a strong economy have all worked well to continue the rally in equities that has been going on for nearly a decade.

A trade agreement, hammered out with Mexico, also excited investors, sending the Dow up another 259 points on August 27. The agreement calls for producing more automotive parts in the U.S., among other things.

Before this lengthy bull market, the next longest market ended in March of 2000. But, the market’s PE (price/earnings) ratio this time around looks much more attractive. Stocks are more fairly valued and interest rates are lower than during the last rally.

The gains more recently have been largely in domestic equities with emerging markets not as strong.

On August 24, the Dow Jones Industrial Average hit 25,790.35.
Stimulus efforts taken by the administration have had a positive impact on the supply side, and businesses have invested in technology and equipment, with better productivity growth as a possible result. This scenario was seen in the late 1990s.

Consumer spending has been strong and many retail stocks have reflected this in their earnings. These things have help bolster the rally in the market, despite some volatility along the way.


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