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Longest bull market?

There has been a fair bit of news print and televised media attention devoted to the claim that we are now experiencing the longest bull market in history.  We respectfully disagree and do not think this bull-run is even close to being the longest.  The current bull market began in March 2009.  We believe that the longest bull market began in 1982 and ended in March 2000 enduring for 18 years.  If one accepts our assertion the current bull market is only a little more than halfway to overtaking the longest bull market in history.

What gives? It comes down to how we define a Bear Market.  There is consensus that a Bear Market is a decline of 20% or more.  Many argue that both Black Monday1 in October 1987 and a 1990 market decline largely stemming from Iraq’s invasion of Kuwait are Bear markets interrupting the Bull run from 1982 - 2000.  Black Monday is infamous for the largest single day market decline in US stock market history, a decline more than 20%, a technical Bear market.  However, keep in mind that the S&P 500 ended 1987 positive on the year up 5.81% and the market following Black Monday would soon begin retracing its losses.  With the passage of time it becomes clearer that the sell-off appears more a violent correction due to financial engineering caused by the popular sale of what was known at the time as portfolio insurance.  As the market dropped it triggered more and more sales from so called portfolio insurance leading to a cascade effect of automatically triggered sales.  

In 1990 surrounding Iraq’s invasion of Kuwait2,the S&P 500 did indeed drop 19.9% peak to trough.  It’s widely accepted that a 20% or more decline results in a Bear market.  Only by rounding higher the 1990 market decline do we count it as a bear market.  Many, maybe ready to accuse me of using semantics, which could be a fair point.  But what about the 19.4% market decline during 2011 then? If not for using closing prices, rather than intraday prices the 2011 decline is a Bear market.  Using intraday highs and lows the S&P 500 would decline 21.6% from its May peak to its October trough.  In addition the 1990 market decline was shorter in duration and recovered more quickly than the 2011 market decline3.  Many have likely already forgotten that the 2011 market decline stemmed from a political standoff over the debt ceiling, which would lead to the sequester agreement between Congress and President Obama.  

With the benefit of time it is clearer and more readily apparent that the bull market interruptions in 1987 and 1990 are mere blips on the path to a rising stock market.  Further it is only through what I would argue are debatable distinctions that the 1990 market counts as a Bear and the 2011 market does not.  If one accepts my points than it stands to reason that we are merely halfway to being in the midst of the longest bull market in history.  My primary takeaway for investors is to stay the course and remain invested.  Bull markets do not die of old age and the duration of the current bull market whether we label it the longest or not is no reason to deviate from our long term investing plan.  

Kevin T. Curran
Chief Investment Officer, Investment Committee

1. Black Monday, 19 October 1987, the S&P 500 peaked 25 August 1987 and bottomed 5 December 1987
2. 1990 Recession, Iraq invades Kuwait causing a spike in oil prices.  The S&P 500 peaked 16 July 1990 and bottomed 11 October 1990  
3. 2011 Debt Ceiling standoff, the S&P 500 would reach an intraday peak 2 May 2011 and bottom at an intraday low 4 October 2011.    

Please check with your tax advisor, your Curran Wealth relationship manager, or contact Curran Wealth Management if you have any questions.
518.391.4200 • info@curranllc.com

The information herein is considered to be obtained from reference sources deemed reliable, but no representation or warranty is made as to its accuracy or completeness. No one connected with CIM, LLC or CIMAS, LLC can ensure tax consequences of any transaction.