- On Wednesday the bull market in stocks became the longest on record by one measure.
- But strategists have identified at least four other reasons any celebrations should be put on hold.
Both statements are accurate; it just depends who on Wall Street you’re asking.
While there’s agreement that the S&P 500 clinched a new high on Tuesday, not everyone concurs that the market achieved an even more impressive feat the following day. From March 6, 2009, through the market close on Wednesday, the index went 3,543 days without entering a bear market, defined as a 20% drop from its recent highs.
“There are conflicting views,” Kurt Spieler, the chief investment officer of wealth management at First National Bank of Omaha, said. He added: “Don’t let the age of the bull market affect portfolio or investing decisions.”
Business Insider has counted at least five different ways that investors and strategists are keeping tabs on the length of this historic bull market.
Started from the bottom
Investors popping the champagne bottles this week are tallying the days since the S&P 500 bottomed during the Great Recession.
Bank of America Merrill Lynch is on board with this measure. “Get the bubbly out,” said Michael Hartnett, the bank’s chief investment strategist, in a client note three weeks ahead of the celebration.
This measure also has the endorsement of S&P Dow Jones Indices, which manages the benchmark indexes.
Don’t count weekends and holidays
This is similar to the first measure, except that it excludes days when the market was closed.
“If you go by trading days (my preferred way), it doesn’t happen until the last day of August,” Ryan Detrick, a senior market strategist at LPL Financial, tweeted on Wednesday.
He added: “It will be worth the wait.”
It’s not about the bottom
We may be getting the start date all wrong.
Michael Batnick, the director of research at Ritholtz Wealth Management, argued in a blog post that a bull market actually begins when the market reclaims its old high, not when it bottoms.
By this measure, the bull market began in March 2013, when the S&P 500 finally closed above its 2007 low – not in March 2009.
Wait until we close at a new high
“Until the S&P 500 closes at a new high, January 26th, 2018 represents the end point of the current bull market because that’s the date of the S&P’s highest closing point of the bull market,” Bespoke Investment Group said in a recent blog post.
Based on this argument, the S&P 500 came within a hair of the milestone on Tuesday when it rose to an intraday high but failed to close at a new high. If stocks proceed to plunge 20%, January 26 would mark the start date of that bear market, Bespoke said.
In fact, the market’s failure to nail a historic bull run by this measure is an ominous sign because fewer stocks are participating in the rally now compared to January, according to David Rosenberg, the chief economist at Gluskin Sheff.
“History may end up proving that just as investors celebrated the longest bull market ever, defined as the length of time without a 20% drawdown, the very same day we saw a classic double-top that defined the end of the bull market,” he said in a note on Wednesday.
It’s felt as if we had a few bear markets
“Whichever camp you fall in, the salient point is that I believe we experienced two resets along the way, invalidating the notion that this is about to become the longest bull market in history,” Batnick wrote.
In other words, if a 20% drop is a bear market, then we’ve kind of had a few.
“Remember, a 20% correction based on closing prices is the commonly accepted threshold to mark the end of a bull market,” LPL Financial’s Detrick said in a note on Wednesday. “Well, the S&P 500 Index corrected more than 20%intraday back in 2011, and in February 2016 the median S&P 500 stock was down 25% (as the S&P 500 slid 14.2%).
There are a few more examples.
“The only way this is the longest bull market on record is if you 1) call the 19% decline in 1990 a bear market, 2) don’t call the 19% decline in 1998 a bear market, and 3) don’t call the 19% decline in 2011 a bear market,” Bespoke tweeted.
Batnick further said that the Russell 2000 fell 26% during the 2016 sell-off. Even though the S&P 500 and the 30-member Dow Jones industrial average receive the most attention, the Russell 2000 covers a wider swath of small-cap companies.
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