by Ryan Kurtz
Just in case you haven’t been paying attention the last 3127 calendar days, we are in a bull stock market (as of September 30 measured by the S&P 500). That means stocks have been on a steady climb and have not had a 20% drop from its highest point since 2009. So when will this bull market end?
Before answering that question, let’s start by looking at what has really happened in the last 3127 days.
Over the last 8 years investors around the world were willing to pay more to own companies like Walmart, Apple, and Exxon. Even though the Federal Government shutdown briefly, terrorists attacked different places around the world, and we had two Presidential elections during that time period, investors as a whole have felt confident in owning stocks. The stock market is like an auction, when you have bidders that are willing to pay more for something, you have to bid higher to get it and that is what investors have been willing to do.
So when will this bull market end?
Many economists, financial advisors, and business writers have been more than happy to give their opinions and predictions on when this may occur. The truth be told, nobody knows.
This bull could keep running for another 8 years or the market could begin its descent tomorrow.
To keep things in perspective, let’s look at history and what we can expect to be normal.
Dow Jones Industrial Average from 1900 – 2016 (information based on Capital Group research)
-5% decline about three times a year
-10% decline about once a year
-15% decline about once every two years
-20% decline about once every 3.75 years
What is the lesson in this?
We do not know how long this bull market will last but when it does end, it is not a tragic event. It is normal for investing into the stock market.
So what can you do?
Review your financial plan regularly and make sure you are prepared if your investments in the stock market begin to lose value. Historically, if you were able to hold them long enough, you would have been rewarded by enjoying the next bull market that came along. Although past results are not a guarantee of the future, this can be a comforting fact to a long term investor.
“The market is the most efficient mechanism anywhere in the world for transferring wealth from impatient people to patient people.” — Warren Buffett
If you are wondering if you are prepared for this bull market to end, contact us at Bare Wealth Advisors. We would be happy to review your plan with you.