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Market Update: 03-05-18

THE BULL IS 9, CAN IT MAKE 10?

John Lynch Chief Investment Strategist, LPL Financial | Jeffrey Buchbinder, CFA Equity Strategist, LPL Financial

The bull market will celebrate its ninth birthday on March 9, 2018. During that nine-year period, the S&P 500 Index nearly increased fourfold in value including dividends, producing a total return of 385% (19.2% annualized) while rising almost 300% in price. The recent market volatility, driven by fears of tariffs, inflation, and monetary policy, has many wondering if this is the end of the road for the bull market. So how much might the current bull have left in the tank? Given that we are not seeing the warning signs that have historically signaled the ends of past bull markets, including excessive equity flows and activity in initial public offerings and mergers and acquisitions, we would not be surprised if the current bull market celebrates its record tenth birthday next year. This week, we look at some of our favorite bull market indicators and the signals that accompany them.

HISTORICAL PERSPECTIVE

On March 9, 2009, the S&P 500 closed at 676.53, which was the low close for the worst bear market in stocks since the Great Depression. Few believed it possible at the time, but at 109 months old, the current bull market now ranks as the second longest since World War II, with only the 1990s bull market seeing larger percentage gains [Figure 1]. Although many might feel like this bull market did nothing but go up the full nine years, remember that the S&P 500 was essentially flat during calendar years 2011 and 2015, each experiencing corrections of 19% and 14%, respectively. Not to mention the fastest 10% correction from new highs ever (nine days) that took place last month. It is notable that at the same stage of the 1990s bull market, the S&P 500 was up 344% on a price basis (compared with the current bull, which is up 297%), before moving up to a 417% gain at its peak....

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