Chart Talk {03.09.17-The Bull's Eight Year Anniversary}

This week is the 8th year anniversary of the beginning of our current bull market.  To mark the moment we've shown above a weekly chart from Tradingview.com of the S&P 500 ETF, SPY.  You can double-click on this if would like a larger view of this chart.  

They say a picture is worth a thousand words and that's one of the reasons I like charts.  It's easier to visually appreciate this market's eight year advance this way.  Now let's talk about three things that are relative to this chart.  First, the reason that we've seen such an improvement in stock prices over the years is that things have continuously been getting better since the bottom in 2009.  That's not to say that things are perfect, that there are no problems out there and everything is fixed.  All you need to do is read the news or watch it on TV to know that is far from the case.  Irrespective of that and on many metrics, the economic health of the US and the developed world is far better today than it was back in March, 2009.  As long as things continue to get better on the economic front then the markets will have the potential to continue their advance higher.

The second is that over the years you've had plenty of time to get invested.  It's not like you had to be all in back in 2009.  It seems easy now to think about going all in back in March of that year.  Believe me when I say nobody back then was advocating that.  Stocks had lost nearly 60% of their value by that time and most of the financial news was telling investors to brace for more.  Even if you missed the first initial pop the market kept giving you opportunities to invest.  Like most bull markets, this one has followed a stair-step pattern higher.  It advances then pauses to catch its breath.  Now some of those pauses are short in nature.  Others take longer to consolidate.  Our most recent consolidation, right before the market's breakout after the election, took almost two years.  Also some of the declines you see in these charts above were periods where the markets lost 10-nearly 20% in value.

That leads to the third point.  They say that bull markets climb walls of worry.  This market is no exception to that rule.  Every one of those declines, each of those periods when markets paused, has been met with scary headlines and all sorts of reasons for why you should sell.  Listening to those folks has caused investors to leave so much money on the table.  The folks that listened all those years and are waiting for the markets to return to some horrific levels as civilization implodes are still waiting.  Sure, someday it might happen.   At some point there's going to be another bear market.  Easiest way to describe when that will be is when things start to get worse and look to do so for a long period of time.  What we do know is if you are one of those perms-bears. one of those gurus that has been arguing through this cycle that things are going to fall apart and this is the top of the market cycle then so far you've been wrong.  Massively wrong.   If you're in that camp and want to say that things cannot possibly get any better from here and this time you're right that we've seen the zenith for this cycle, then you're still starting from much higher levels than anybody could have hoped eight years ago.  

I say this now knowing that stocks are overbought, at higher valuations than we've seen in a long time and there's a bit of speculative fever in the land now regarding equities.  Probability would suggest that we could see some sort of pause in the current run for a bit.  Not saying that's going to happen just saying that the odds are higher for that outcome now than maybe even a few months ago.  This is something we'll perhaps touch on in a future post.  But even if this market pauses, even if we see an ordinary decline within a bull market, that will not necessarily mean that the run which started eight years ago will be over.  More than likely it will be more of what we've seen in the past, a period of consolidation.  As long as things continue to get better on an economic front, then this market has the potential to continue it's longer term advance.   Where we are now is a far cry from what we all feared in March, 2009.  It is far better than what the naysayers said was going to happen.  Listening to them has cost investors money but also that other most precious commodity, time.

More on the "cost of time" aspect regarding the markets next week.

Back Monday.

*Long ETFs related to SPY in client and personal accounts although positions can change at any time without notice or dissemination on any other form of electronic media.