Bull Market Celebrates Eight on a High

As the bull market in US stocks gets set to celebrate its eighth birthday this week, it is stunning to consider how far we have come. On March 9, 2009, here was the closing level of the three major indexes:

• Dow: 6547 – lowest level since April 15, 1997
• S&P 500: 676 – lowest level since Sept 12, 1996
• NASDAQ: 1268 – lowest level since Oct 9, 2002

Nearly eight years later, stocks soared to new records and even took out some new milestones levels. I know that these are just numbers, but they are big, round numbers and when we bust through them, there is a sense of progress. And recently, this has been very quick progress…since Election Day, the Dow Jones Industrial Average has taken out 19,000, 20,000 and last week, 21,000. In fact, the Dow just tied its fastest thousand-point jump in history: It took 24 sessions to rise from 20K to 21K, matching the same amount of time that elapsed between 10,000 and 11,000 in 1999. Of course the percentage gain back then was far more impressive, but still…

As a bit more of historical frame of reference, the current eight-year bull is the second longest on record. That said, we still have a long way to go to make it into first place. To eclipse the 4,494-day bull market that ran from December 1987 to March 2000, this bull would need to make it past June 28th, 2021, without experiencing a 20 percent decline from a closing high.

Who knows—maybe the so-called “Trump Bump” will propel stocks into the next decade, but that seems like a long shot at this point. What we know the post-election rally can be attributed to three specific potential policies, all of which the President mentioned in his speech before Congress last week.

1. Infrastructure spending: It doesn't matter how it's created, whether it's private or public funds, because $1 trillion in spending will likely provide a boost in sectors like construction and materials. It could also increase employment in those areas.
2. Individual and corporate tax reform: Investors are likely to redirect savings into the markets and businesses could use the extra money to reward shareholders in the form of bigger dividends.
3. Loosening of regulations: For many industries, like banking and energy, these changes are expected to amount to huge savings.

What could possibly go wrong in this rosy scenario? Besides the sheer length of the bull, there is a concern that there’s a bit of complacency seeping into the investor mindset. One place to see that is how long it has been since there has been a big losing session. The S&P 500 hasn’t had a one percent down day since October 12th, the longest such streak since 1995.

Then there are valuation levels, which show that stocks are more expensive than their historical averages. Companies in the S&P 500 traded at an average of roughly 22 times the past 12 months’ of earnings last week, above the 10-year average of around 16, according to FactSet. Even the IPO and first trading days of SNAP, parent of disappearing message service Snapchat, feel a bit 1999-esque frothy. While every SNAP investor is betting that the company will be able to leverage and monetize its 158 million active daily users, it is currently a $35 billion company that lost more than a half a billion dollars last year.