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Up Seven Years in a Row... Now What?By
Tuesday, January 5, 2016
Bull markets in stocks don't have an expiration date.
They don't have a life expectancy.
If you take nothing else from today's message, please remember those things.
The U.S. stock market has now gone up for seven straight years. (In 2015, the market was up 1.4% on a total return basis.)
But even after that incredible run, it doesn't mean stocks are headed for a "down" year in 2016.
Yes, seven years is a long time. And it's true, bull markets in stocks typically don't last this long... But it is a serious mistake to think that they have a life expectancy.
To see what I'm talking about, let me show you what happened in the 1980s and 1990s...
These long stock-market booms went out with a bang, not with a whimper. I expect our current great bull market will go out with a bang, not a whimper, just like the last two.
In the 1980s... stocks went up for up for eight years in a row – finishing up with an astounding 31.7% gain in 1989. Take a look:
1990s bull market was even more impressive, up nine years in a row. The last five years were all strong. Take a look:
The last two years of the 1990s were even better than they look here... What you don't see here are the crazy gains in tech stocks in the last two years of this boom... The Nasdaq index soared 40% in 1998 and 86% in 1999.
Meanwhile, the last two years of our boom have been tame by comparison... up almost 14% in 2014 and up just over 1% last year.
This is not what the end of a great bull market typically looks like.
Great bull markets typically end with incredible investor enthusiasm, wide investor participation, and (quite often) big returns.
We are not seeing any of these things, yet.
Great bull markets don't end on a time schedule. They end when we reach an extreme of optimism. We are not there, yet.
I could be wrong, of course. I will protect my downside risk by following my trailing stops. But I do believe we have more upside before our great stock-market boom ends...
Good investing,
Further Reading:
Make sure to read Steve's latest ideas right here:
"It could be the start of a major turnaround in one of my favorite places on the planet."
"It would be absolutely foolish for the Fed to raise interest rates very much in 2016..."
Market NotesKEEP AN EYE ON THIS SECTOR IN 2016 Today's chart shows us more troubling signs from the retail sector...
Outside of a small handful of names, retail stocks experienced a big downfall in 2015. Three that stood out in particular were giant department store chain Macy's (M) and clothing stores Nordstrom (JWN) and Gap (GPS).
Some see the decline in these businesses as a sign of changing consumer trends, with more people choosing to shop online. (Shares of Amazon have rocketed 100%-plus over the past year.) But the movement in retail stocks also serves as an indicator of the health of the economy.
As you can see from the chart below, these three big names are down 35%-plus over the past year. This trend alone isn't reason to panic and sell all of your stocks... but it is a good reminder to stay cautious.
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