How Long Will the Current Bull Market Run?

The Dow Jones Industrial Average hit 20,000 for the first-time last month as it continues its march into record territory – showing that there is no slowdown in the current bull market that has lasted almost eight years. The question on our minds, as well as others in the investment community, is whether or not this current market surge is just a “Trump bump” or is part of a more sustainable trend?

MarketWatch published a recent chart and article stating that this bull market may last another 7-8 years.

So where does a market go after such a monumental milestone? Apparently, further north.

Andrew Adams, a market strategist at Raymond James, believes as far as the bull market is concerned, the current one still has many years left before it fizzles.

“Based on history, we could still have 7 to 8 more years left, and there’s a chance it could go longer since the 2007-2009 period was historically bad and may have extended the recovery phase,” said Adams.

As the chart above illustrates, there have been eight major structural markets—long-term primary trends—since 1896 and each has lasted an average of 14 years.

In fact, the strategist thinks the stock market of 2017 resembles the golden era following World War II and the boom years of President Ronald Reagan’s presidency.

Apart from history, the market today also has favorable economic conditions at its back, including a relatively low interest-rate environment, stable inflation, and what some describe as a recovery in corporate earnings.

“Market sentiment remains well-below bubble levels, the primary economic indicators remain trending up, employment is strong, [and] wages are picking up – basically everything supporting the fact that we are nowhere near a recession or headed for an end to this bull market,” Adams said.

Not So Fast.

While we share their sentiments that the bull market likely won’t end in the immediate future, we don’t believe it will last another 7-8 years as predicted. Additionally, we strongly suspect there will be a meaningful correction (10% to 20%) sometime prior to the beginning of the next bear market.

The concern we have is, very simply, that stocks and bonds today, as the result of the 2008 crisis and the subsequent government intervention– particularly with regard to quantitative easing programs– has driven money into the stock and bond markets to such a point that they are now dramatically overvalued by any and all historical standards.

Therefore, we think that the risk in both of those asset classes is unusually high. However, at the current moment, we do think that despite the fact that this recovery is among the weakest in history, it is continuing to strengthen. Therefore, we think it could be up to another two to three years before we have another bear market or recession.

We believe that now is a good time for investors to check their risk numbers and consider alternative asset classes to protect their portfolios. Alternative investments include natural resources, high yield bonds, real estate, hedge funds, and other types of opportunities that don’t directly correlate with the stock markets.

That way, no matter when the bears return, your investment portfolio is better protected for any downside surprises and better positioned for higher returns.

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