34 Days in the Life of a Bull Market
March 17, 2016 – Here’s a headline from Business Insider at 4pm on February 11, 2016:
“CHAOS ON WALL STREET: Here’s what you need to know”
By Myles Udland, Business Insider “The latest sentiment reading from the American Association of Individual Investors released on Thursday showed that just 19.2% of respondents called themselves “bullish,” the second-lowest reading since the financial crisis.” (Read more…)
It seems like a long time ago that St. Louis weather forecaster Dave Murray was predicting snow and temps dropping down to 8 degrees for February 12. Things change quickly.
The current bull market (continuous gain without decline of 20% or more) in the US stock market as represented by the S&P 500 Index is now 84 months old as of March 9. On February 11, it didn’t look like it would live to see 85. At that point, the Nasdaq, small stocks in the US, and most global stock markets were already in bear market territory (a decline of 20% or more from a recent high).
Sentiment was terrible. As of last week (March 9), sentiment has recovered materially to 37.4% “bullish.” For the record, bullish sentiment averages about 38.6% according to AAII.
Please note that this post is not assuming that February 11 was the official “bottom” of the market declines that began in earnest on May 21, 2015. We hope that it was and with the strength of recovery over the last 34 days, it would take a sizeable “re-correction” to get us back to new lows. That isn’t our expectation and either way, we are making a bigger and more common point: sentiment was near 2008/2009 financial crisis lows immediately preceding the results of the last 34 days.
Here are the returns of a broad range of global stock markets since February 11:
– US Large Core Stocks (S&P 500 Index): +11.1%
– US Large Value Stocks (Russell 1000 Value Index): +12.2%
– US Large Growth Stocks (Russell 1000 Growth Index): +11.0%
– US Mid-Cap Stocks (Russell Mid Cap Index): +14.6%
– US Small Cap Stocks (Russell 2000 Index): +12.9%
– Developed Int’l Large Stocks (MSCI EAFE Index): +10.9%*
– Developed Int’l Small Stocks (MSCI EAFE Small Cap Index): +11.4%*
– Emerging Markets Stocks (MSCI Emerging Markets Index): +14.9%*
– Real Estate (DJ Global Real Estate Index): +13.1%*
This story never gets old. However, it is often forgotten or discounted. It is the historical story of market declines following advances and market advances following declines. Over and over, investors have the opportunity to “buy low and sell high.” As you surely know by now, we are huge proponents of doing just that by the discipline of regular re-balancing. We look for such opportunities and find them often.
As unpleasant as volatility in stocks can be, we believe strongly that the seeds of future results are planted in the “off season.” Hope you agree and are encouraged by the early “market Spring.” Like you, we hope the next winter is a ways off.
Todd H. Brand
President & CEO of Brand Asset Management Group
*The international, emerging markets, and real estate indexes shown are preliminary estimates as we don’t have firm 3/16/16 results in yet for those benchmarks.