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Second-Longest Stock Boom in History. Should It End Soon?By
Wednesday, May 6, 2015
The current stock market boom is 2,280 days long – the second-longest stock market boom in history.
It will certainly end someday. But when?
Stocks have gone up for six years in a row so far. Stocks have never gone up seven years in a row. However, if stocks finish up in 2015, that would set a new record for consecutive years of stock market gains.
This stock boom has to be living on borrowed time... right?
After all, it's the second-longest stock boom in history... and we could set a consecutive-year record this year. So it has to end soon, right?
Not so fast...
The stock market is not a person. It doesn't have a life expectancy.
I learned this lesson from watching one of my early investing heroes – Vic Sperandeo – start to falter. He believed in a stock market boom's life expectancy – and he got burned. The non-stop stock boom of the 1990s blew away any historical records of life expectancy.
The lesson I took away from seeing his life-expectancy system blown apart is that a stock market boom doesn't have a life expectancy in terms of years.
In the stock market, each new day is like flipping a coin – just because it came up "heads" yesterday doesn't mean it will come up "tails" today. Similarly, the stock market doesn't have to go down this year because it went up last year.
Don't get me wrong... There is a "life cycle" to a stock market boom...
The stock market bottoms amid deep despair among investors when nobody is in the markets. The stock market works its way through your emotions, and eventually peaks when investors are giddy and everyone is in the markets.
I've said in the past that we're in the eighth inning of this bull market, approaching the ninth inning. But investors have not reached that point of extreme optimism yet, where nearly everyone is in stocks. We will get there.
So yes, stocks are up six years in a row. And yes, this is the second-longest stock market boom in 100 years.
But no, stocks don't have to go down, yet. Age is not the primary reason stock market booms end.
Investor euphoria is the primary reason stock markets peak. And we are not there yet. So don't bail out of the stock market now... it's not quite time, yet...
Good investing,
Steve
Further Reading:
Steve recently explained why stocks are still cheap despite the six-year bull market. "Most people don't get this," he writes. "They see that stocks are expensive based on history. But they are ignoring the fact that interest rates are near zero – making stocks cheap relative to bonds." Get the full story right here.
Steve also shared a sector that is getting close to a major turnaround. "You need to keep an eye on small-cap resource stocks right now," he writes. "They're down nearly 80% in four years... And once they turn around, the upside opportunity is incredible." Find out why right here.
Market NotesAN UPDATE ON A VERY IMPORTANT TREND Today's chart provides an update on the most important trend nobody is talking about... JPMorgan Chase just broke out to a new all-time high.
Regular DailyWealth readers know we monitor America's big banks, like JPMorgan Chase, Bank of America, and Citigroup. These firms are the "financial backbone" of America. They rise and fall with America's ability to make money, save money, service debts, and generally "just get along."
Like most stocks, the big banks suffered a crash in 2008/2009. Since then, they have worked their way into a bull market you almost never hear about.
The chart below shows this uptrend at work. It displays the price action in megabank JPMorgan Chase over the past two years. You can see that JPM is enjoying a series of "higher highs and higher lows." Shares are up more than 30% over the past two years... and just yesterday broke out to a new all-time high. It's a bull market in American banking.
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