With such sizzling gains, are investors getting spoiled?
Assessing the Bull
A basic understanding of history shows us that bull markets in stocks can vary greatly in both length of time and price return. The table to the left highlights the 20 cyclical bull markets since World War II, with a bull market defined as an extended period of above-average stock price increases, coupled with abbreviated declines.
For perspective, let’s compare the length of the current bull market with previous ones. Although the bull run from Mar. 31, 2009 to Apr. 30, 2011 lasted just 760 days, if we merge it with the Oct.31, 2011 to Dec. 31, 2013 bull market, the combined duration is 1,552 days.
That’s more than double the length of the median bull market since 1945, which has lasted just 700 days!
On the other hand, the duration of the current bull cycle is still shorter (1,541 days) compared to the 2,830 days from 1990-98 and the 1,826 days from 2002-07.
Although today’s bull market duration may not look statistically unusual, its heavy dependence on central bank generosity is definitively unlike previous eras. And that’s the biggest difference of now versus then. More importantly, how will the stock market behave in a post-QE world?
Overvalued vs. Fully Valued