US Equity Bull Run: Second Longest Based On Economic Expansions

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How old is the bull market in US stocks? By some accounts, we’re knee-deep in the oldest run on record. But some analysts beg to differ. Thanks to several possibilities for measuring such things, there’s a debate about the appropriate methodology for dating the age of the current run-up in stock prices. Here’s one more: measuring the bull market from the point when the last NBER-defined recession ended. By that measure, the current rise is the second longest on record, based on modern history of the S&P 500 (since the mid-1950s).

The logic for dating a bull market from the point when a new economic expansion begins is grounded in the reality that periods of macro growth drive equity prices upward (and recessions play a big role in creating new bear markets). By that reasoning, the upside trajectory for the S&P 500 can be measured from July 1, 2009, the first day following the end of the Great Recession, according to NBER.

Using that yardstick tells us the bull has been in force for 2,315 days through yesterday, Sep. 10, 2018 (red line in chart below). That’s second only to the to the 10-year run (2,528 days) through March 31, 2001 (green line).

There are alternative and perhaps superior rules for measuring bull markets. A popular approach is calculating the bull’s age from the previous low point, which is March 9, 2009. Another gauge is starting the clock when the S&P rises above its previous high following a bear market, which trims the current run considerably. Josh Brown of Ritholtz Wealth Management favors this rule, which puts the start date in the spring of 2013.

Meanwhile, other analysts invoke more complexity for picking start and stop dates. For example, Jeff Hirsch, editor of the Stock Trader’s Almanac, recently pushed back on the notion embraced in some circles that the current bull run is the oldest on record. Last month he advised that “using Ned Davis rules the longest bull began on October 11, 1990 and ran for 2836 calendar days until July 17, 1998. The current bull that began on February 11, 2016 would have to run until November 17, 2023 to beat it.”

However you measure the upswing there’s no doubt that the current run has been powerful, overcoming turbulence in this year’s first quarter and defying more than a few recent forecasts that the good times were ending. How long can the party last? No one knows, but for the moment it appears that the end isn’t imminent.

An econometric technique (Hidden Markov model, as detailed here) suggests that there’s still life left in the old bull. By this metric, the estimated probability that the S&P 500 has entered a bear market is virtually nil, as of yesterday’s close.

Meanwhile, the fuel provided by an economic expansion remains intact. As reviewed in this week’s update of the US Business Cycle Risk Report, the numbers to date reflect a near-zero possibility that an NBER-defined downturn has commenced. Near-term projections see more of the same, although the macro trend is looking wobbly for estimates through the first quarter of 2019. But that’s a highly speculative outlook at this stage, albeit one that deserves careful monitoring.

Meantime, the aging bull market is intact and the data published to date offers little reason to argue otherwise. Tomorrow, of course, is another day.


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