Milan Cacic
December 04, 2021
Money Economy Commentary Trending Weekly updateIS THIS THE END OF THE BULL MARKET?
Markets don’t like uncertainty. When the news came out last week about the Omicron Variant, it sent the markets into disarray. It also left a lot of investors wondering or worrying if this was the end of the bull run that started in April 2020. During times of uncertainty, we try to check our emotions at the door and use a little history to help us make the right decisions.
In our notes last year, we talked about being in a long-term secular bull market. Secular bull markets tend to last for 10 to 20 years. If we use history as our guide, then the chart below tells us that we are midway through a secular bull market and it probably doesn't end until the S&P 500 reaches 8,000 (it’s currently at 4,685).
The chart below is a little busy but it gives you a good long-term look at how secular bull markets make tops and bottoms. From a technical point of view, what this chart is telling us is that a secular bull market starts when the S&P 500 is 50% below its trendline and ends when the S&P 500 is 100% above the trendline. The purple line at the end of the chart is the historical average secular bull market trend (both in duration and growth) that we believe began in 2009. Obviously, market behaviour is not this simple and history does not always repeat itself, but it does provide good non-emotional data for us to observe.
If we follow this logic, then the current secular bull market started during the financial crisis in 2009 and will end when the S&P 500 reaches around 8,000, sometime close to 2025. Now I want to be clear, there can be lots of volatility and negative surprises during a secular bull market. 10%-15% corrections are not uncommon and sometimes we get surprises (like COVID 19 and now Omicron) that can make the markets drop even more. However, earnings are still growing, albeit not as fast as they were in the first two quarters. The world economies are still opening up and fiscal stimulus is still rampant.
We remain cautiously optimistic.
Source Fidelity Investments
I have also included a link for the Economic Outlook with Benjamin Tal virtual event. If you were unable to join the webcast live, or if you wish to watch it again, there is a recording available through the link below:
Virtual event - Ben Tal November, 23rd 2021: link
If you have any questions please give us a call anytime.
Have a great weekend.
Milan