Records That are Made to be Broken - August 21, 2018

August 22, 2018 is the date when the current bull market will assume the title as the longest bull market ever – based on S&P 5002 performance (CNBC).

  • It is set to surpass the long-running bull market of the 1990s: October 1990—March 2000.

  • The current bull market began March 10, 2009 after the S&P 500 bottomed on March 9 at 676.53 (St. Louis Federal Reserve).

One caveat – the S&P 500 Index must break its prior closing high of 2,872.87 set January 26 before it can officially be declared the new champ.

  • The S&P 500 closed at 2,857.05 Aug 20 (WSJ), 0.55% below the high.

With a gain of 322%, the current bull run falls short of the 1990s run of 418% (St. Louis Federal Reserve).

Tailwinds for continued market performance include—

  • Economic growth, profit growth, and low interest rates.

Headwinds include—

  • Lingering trade worries, weakness in emerging markets, foreign currency woes, and a possible policy mistake by the Fed.

Bottom line--

A bear market, which would officially mark the end the current bull market, is defined as a 20% drop in the S&P 500.

We have come close to 20% declines outside a recession – 1998 and 2011. We experienced a mild bear market in 1966 (down 22%) that coincided with a sharp economic slowdown but no recession (St. Louis Fed).

With the exception of the 1987 market crash, however, bear markets closely coincide with recessions (St. Louis Fed, NBER). Leading economic indicators suggest odds of a near-term recession are currently low.