MarketMinder doesn't like to dwell on the past because it can't tell you much of anything about the future. But we feel it's incumbent upon us to highlight a scarcely recognized fact: The bull market for global stocks is five years old. Here's one of the few acknowledgements we found:
Happy Birthday, Bull
By David Landis, Kiplinger
Five years ago yesterday, the S&P 500 closed at 776.76. Today, it sits around 1560…over a 100% recovery in five years. Good times!
According to Standard & Poor's, in those five years Energy stocks were the winner, gaining over 236%. Other economically sensitive sectors also flourished, including Materials with 157%, Industrials with 124%, and Technology's 144% gain. Traditionally defensive sectors like Consumer Staples and Health Care lagged, each with about 40% gains. An outlier was Utilities, which racked up a whopping 168% rise in the period. On balance, that's very close to what you might expect from an economy experiencing sustained expansion and high demand. And these are merely US returns—foreign stocks fared even better.
Perversely, such a big recovery scares many—they proclaim it's been "too much too fast." But history tells us this recovery wasn't all that big. The current bull is actually the second weakest of seven post-World War II bull markets that lasted five years or more, according to Standard & Poor's.
The "aging bull" argument doesn't fly either. It's a strange thing to believe stocks should go down just because they've been going up. This is a perversion of the mean reversion theory, which simply doesn't pertain to stocks. There's no mathematical, economic or financial law that says earnings, economic growth, or stock prices must revert back to any kind of average. Trends can last as long as underlying fundamentals support them. (See our past commentary "Vector Investing" 9/27/07 for more.)
To wit, the fundamental drivers propelling this bull remain intact: Better than expected corporate earnings and global GDP, high M&A and share buyback activity, and relatively dour sentiment (among many other positives out there) are all very much a reality today.
Yep, it's been a good five years. We hope you enjoyed the ride, but we suspect most didn't. Thinking back, folks fretted over everything from dollar doldrums, energy prices, terrorism, trade and budget deficits, carry trades, credit crunches, inflation, and consumer spending (to name a few). At one time or another each was hailed as the Apocalypse, yet NONE had the potency to slay the bull. We think that's a great thing: Pessimism and undue worry are the stuff of bull markets; euphoria is the bane.
Today's real risks (yes, there are always risks) are minimal and well contained. Deleterious government regulation, protectionism against free trade, and monetary or fiscal policy errors are remote. (For more, see yesterday's commentary, "The Real Risks.")
Looking back, it's apparent stocks reflected reality—not media hype—over the past five years. And while it's crucial to remain vigilant, don't forget to step back once in awhile and appreciate the positives of this dynamic and wealth-creating global economy. More gains are just ahead.
Note: Sector returns calculated by Standard and Poor's
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*The content contained in this article represents only the opinions and viewpoints of the Fisher Investments editorial staff.