Before I begin let me state that everything I say here is purely speculation. I have no inside information. I just read a lot and have my own thoughts and opinions on the subject.
If you have been paying attention to the stock market you will have noticed that we have had a pretty extensive bull market run. Even though we are currently experiencing a correction in the stock market (a stock market correction is a 10% loss in the market) we are still technically in a bull market. In order for us to be “out” of the bull market we would have to drop 20% from the high we reached on January 26th.
The current bull market has been going on for over 9 years. That is the 2nd longest bull run in market history. The longest was the great bull market of the 1990s. That lasted about a year longer than we have now.
Because we have been at record highs a lot of people are panicking. They are saying the market is too rich. That you should sell and get out now. The bull market doesn’t have that much longer to run.
I think the last statement is true. I don’t think that this bull market will last more than another year or so. And then we will have a bear market and a drop of over 20%.
However, that doesn’t mean the bull market is over.
Let me explain.
A while ago I wrote a blog post about a subject I have never seen on another personal finance blog (I am sure there is another post, but I haven’t seen it). That article concerned secular bull and bear markets.
A secular bull and/or bear market is a long trend of growth and/or sideways movement in the market. That secular trend typically lasts anywhere from 15-20 years.
A cyclical bull or bear market typically is much shorter. A cyclical bull market, on average, is about 4-5 years. A cyclical bear market is typically 18-24 months. Within a secular bull or bear market there can be several cyclical bull markets AND bear markets.
For example, the average yearly gain during the secular bull market of 1982-2000 was about 18% per year. However, the secular bear market from 2000-2009 was only about a 1% gain. Over the past 8 years we have gained about 15% a year again.
In other words, I believe we are in a SECULAR BULL MARKET. I believe that secular bull market is only about 1/2 way through.
That means we have another 8-10 years of pretty good market gains.
Now does that mean we won’t have a cyclical bear market over the next decade? Of course not. I think we will definitely have one. We might even have two.
But I believe at the end of this market run (secular run) we will see stock market gains similar to previous markets.
Of course, there is no way to predict how long this secular trend will last. There is no way to predict when we will have a bear market.
So what are you supposed to do?
My answer is pretty simple: KEEP INVESTING.
Don’t take your money out. Don’t run for the hills.
I know the stock market was at record highs. BUt isn’t that the point.
In 2017, the stock market hit record highs over 50 times (I think it was even more than that).
By the time I pass away the stock market will probably have hit record highs hundreds of times more. That doesn’t mean that it will go up every year. It doesn’t mean there won’t be times of downward trends. It doesn’t even mean that we won’t experience another loss of what happened in 2007-early 09. You can’t predict the future (even though I am doing here somewhat here). So keep investing. Keep putting money in the market.
3, 5, and/or 10 years from now you will most likely thank me.
I can’t guarantee record returns forever, but I do think the next decade will be pretty good. Unfortunately, I then believe we will have a long period of below average returns and then another period great returns.
Wash, rinse, repeat.
So when will the bull market end? The cyclical one will probably end within the next year or 2. Then we will have a bear market. And then I believe we will have another multiple-year bull market that will bring great returns. By the time, this secular trend is over (hopefully a decade from now) if you stayed invested in the stock market you will be very happy.
And no matter if the market goes down with a long secular “bear” market I will continue to be invested. I won’t stop because of it. Because that means I am buying those shares on sale, which means greater gains far down the road.
What do you think? Is the bull market close to ending? What do you think about secular trends?