Julie Jason's Your Money: Research firm offers a comparison of bull markets

By JULIE JASON March 16. 2018 8:08PM


Let's go back in history nine years to March 9, 2009, the bottom of the financial crisis stock market. That day also marked the start of the current bull market, which is "celebrating its ninth birthday," in Sam Stovall's words. Stovall is the chief investment strategist of CFRA, an investment research firm.

That's a long haul for a bull, second only to the 1990-2000 bull market that lasted 113 months.

"Thus far, this bull gained 325 percent in price through Jan. 26, 2018 (the most recent all-time high), making it the second greatest bull market since WWII and the third since the one that ended with the Crash of 1929," wrote Stovall in his March 12 CFRA Sector Watch. During these nine years, the S&P 500's earnings per share surged nearly 1,500 percent, dwarfing any bull market in history, according to Stovall.

It took only four years for this bull to recoup the 57 percent price decline suffered in the prior bear market, according to Stovall. That's something to celebrate because that's one year less than the average five years required for previous recoveries from bear market declines in excess of 40 percent since World War II.

Stovall is a data hound, as am I, and if you are as well, you'll be pleased to know that he shared tables with me that I in turn share with you on my website. Go to juliejason.com. Hover over "Columns" on the menu, then click "For Readers."

You'll find three CFRA charts:

1) S&P 1500 Sector/Sub-Industry Price Returns: 3/9/09-3/9/18. Pay attention to the three sectors that contributed the most during this period: Consumer Discretionary (559 percent), Information Technology (517.9 percent) and Financials (463.8 percent). The lowest performers were Energy (60.3 percent), Telecommunications Services (78.1 percent) and Utilities (130.8 percent).

2) S&P 500 Price Gains During Bull Market Years Since WWII. You'll see each bull market's returns year by year.

3) S&P 500 Bull Markets Since 1921. In this table, you'll find start and end dates to the bull markets since 1921, with start and end values, percentage gains, the number of months the bull lasted, EPS data, GDP data and a column that shows how much of the previous bear market the bull recouped. That last data point is worth studying. For example, the bull ending in 1933 only recovered 28 percent of the prior bear market's losses. The current bull recovered all of the prior bear's losses and advanced 147 percent more (for a total of 247 percent).

In that table, you'll see real GDP (gross domestic product) growth at 20 percent (cumulative) for the current bull. In Stovall's words, that's "mediocre growth in the U.S. economy, which has recovered from its deepest contraction since the Great Depression." Compare that with 39 percent for the bull ending in 1956 and 38 percent for the bull that ended in 2000. The other three bull markets - those ending in 1966 (25 percent), 1980 (21 percent) and 1987 (26 percent) - were closer to the current bull.

In the table, you'll also see price/earnings ratio (P/E) of 26x for the current bull, just 4 percentage points below the bull market ending in 2000's P/E peak of 30x. Stovall's comment: "But even today's high P/E can be justified by the historically favorable inflation and interest rate environment." (The P/E of a stock is a measure of the price paid for a share relative to the annual net income or profit earned per share.) Here are the trailing P/E's for the five other bull markets: ending in 1956 (14x), 1966 (18x), 1980 (9x), 1987 (21x) and 2000 (30x).

All very interesting, of course, but what's in the future?

Let me quote Stovall: "Today, the question on most investors' minds is 'Did this bull market end in late January, or are we just enduring a traditional resetting of the dials?' At CFRA, we acknowledge that this bull has begun to buck more aggressively, but we don't think it is about to be tamed any time soon. Bull markets don't die of old age, they die of fright - and are most afraid of recession. Even though the current wall of worry remains elevated, we see no recession on the horizon that would pose an impediment to global economic expansion nor stall the projected improvement in corporate profits. This bull market will soon embark on its quest to record a double-digit duration, encouraged by a coordinated global economic expansion and a near 20 percent jump in S&P 500 operating profits in 2018, assisted by the recent U.S. tax cut. But many don't believe it will endure, and have begun to turn against the tide. But true to its astrological sign of Pisces, this market may continue [to] surprise its skeptical school mates and swim on toward a long-distant sunset."

Julie Jason, JD, LLM, a personal money manager at Jackson, Grant of Stamford, Conn., and author, welcomes questions and comments to readers@juliejason.com.


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