Wednesday, March 9, 2011,marked the global bull market’s two-year anniversary—an appropriate moment to look back on the last two years and consider what might be in store for the foreseeable future.
First, recall the pervasive mood in March 2009: There was an overwhelming sense the US economy and markets would never recover—perhaps we were entering a new Great Depressionor a Great Recession or a new era of below-average growth and lackluster market returns.
But since the global bear market bottom on March 9, 2009, here’s what happened (contrary to widespread fears):
There are also notable things that have not happened in the last two years. For example:
So what to expect moving forward? The initial surge off the bottom over the last two years—as is typical of new bull markets—will slow in 2011. Sentiment improved (for some) during the back half of 2010, helping boost prices, but we now have strongly bifurcated sentiment—a divided group of both gung-ho bulls and dug-in bears. The strong bearish presence argues against stocks falling sharply in 2011, but the emergence of optimists helps mute returns in what will likely be an overall sideways market (The Great Humiliator at work!). This isn’t unusual in an ongoing bull’s third year. What’s more, a bumpy, sideways year helps shake out the optimists. We wouldn’t be surprised at year’s end to see the sentiment balance tip back in favor of the bears, who may in turn be surprised by a strong second up-leg of the bull.
Could there be hiccups along the way? Of course. We’ll likely see many of the same fears rehashed repeatedly. For example, the PIIGS/EMU issue isn’t resolved, and folks are still spooked by muni debt. And there will be fresh concerns, like popular uprisings across the Middle East possibly impacting global oil supply security (which is both a new and a very old fear).These and other issues could add to volatility or even cause a pullback or correction.
But volatility and corrections are normal—no bull market year is pristine. And this year, we think volatility is just part of the third year DNA—expected and not producing a drastically bad year. In fact, as we’ve said before, for those able to identify positive fundamental drivers at the industry, sub-industry, and individual stock levels, this could be a pretty fine year.
So happy birthday, bull market! Long may you run!
*As measured by the MSCI World Index. Source: Bloomberg Finance, L.P.
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*The content contained in this article represents only the opinions and viewpoints of the Fisher Investments editorial staff.