Don’t Fear the End of the Current Bull Market

Investors of a certain age recall all too well the end of the last bull market. From late 2007 to early 2009, the S&P 500 Index fell 56% and lost a staggering $11 trillion in market value. That painful memory has many of today’s investors wondering how long the current bull market will last and how they can protect their portfolios from its eventual, inevitable demise. The simple answer, surprising as it may sound, is “don’t worry about it.” Rest assured, I have not lost my mind.

Study after study shows that most investors buy-high and sell-low. This is because they’re convinced they can correctly identify the beginnings and endings of bull and bear markets when, in fact, they can’t… no one can. As a result, the millions of Americans who sold in 2008 when stocks were low missed out on the extraordinary gains that began in early 2009 and persist today.

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Another recent study from Morningstar shows that from 1997 through 2017, inclusive of two bear markets, the S&P 500 Index returned +7.2% annually. But, if you missed just 30 of the market’s best days over that 21-year span, your portfolio would have lost -0.9% annually. Thirty days is a scant 0.58% of the 5,217 trading days over those 21 years. Consequently, in their attempts to avoid the down days in the market, many investors miss out on some of the critically important up days.

Furthermore, in the 9.3 years since the end of the last bear market, the S&P 500 Index is up a total of +350.1%. That’s +17.5% per year, on average. That easily compensates for the 56% decline of the 2008 bear market…painful as that was.

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I’ll end with this tidbit: since 1926, the average bear market lasted 1.4 years with an average cumulative loss of -41%. The average bull market lasted 9.1 years with an average cumulative total return of +476%. Bottom-line, don’t let the eventual end of the current bull market scare you out of the market.