Video Commentary

This Joyless Bull Market

Fisher Investments’ John Hulcher breaks down the joyless bull market and why this is the year of falling uncertainty for stocks.

Video Transcript

Hello and welcome to Fisher Investments MarketMinder Minute.

Many investors remain skeptical about this bull market’s future—influenced by an almost constant stream of negative media reporting and lingering fears of 2008 part two. The Conference Board’s Consumer Confidence survey shows bullishness is far lower than in past bull markets. Mutual fund flows similarly suggest folks aren’t very bullish. Yet, despite fearful headlines and dreary investors, this bull has generated a 190% cumulative return thus far. Now in this bull’s eighth year, many believe the end is near, but bull markets don’t die of old age. They die either when walloped by an unseen factor that wipes out trillions in economic activity or when reality simply can’t meet the expectations of euphoric investors. Today, we don’t believe either factor exists.

Stocks move on the gap between expectations and reality. Consider Sir John Templeton’s adage: “Bull markets are born on pessimism, grow on skepticism, mature on optimism and die on euphoria.” However, sentiment has evolved glacially during this bull market—eight years in, skepticism reigns. People continually look for a repeat of the financial crisis in every nook and cranny. While this persistent skepticism allows positive, albeit slow, growth to beat low expectations, it has muted returns, as investors seem skittish about bidding up stocks much.

In January, we dubbed 2016 “The Year of Falling Uncertainty.” It has lived up to its name, and more clarity likely arrives over the next month and into the new year. Throughout 2016, numerous high-profile fears have been slowly dispelled. High-yield bond markets calmed down, and yield spreads narrowed. People got over negative interest rates. Oil prices stabilized, which should help reduce Energy’s drag on corporate earnings. Brexit was expected to trigger a UK recession, yet with time and data, it seems the vote was a non-event. The raucous US presidential race ended and markets have already moved on. Eventually the Fed will resume hiking rates, helping investors gradually get over their mistaken belief this bull market is nothing but Fed-fueled froth. 

Worries might dominate the headlines, but this is normal for a bull market—the “Wall of Worry” is a cliché for a reason. Sensationalized headlines simply fuel the grinding, skeptical nature of this joyless bull. Remember this as you read doom-and-gloom warnings about rate hikes, Trump and all the rest. The real time to worry is when no one else does. Today is a time for patient optimism.