As measured by the Dow Jones Industrial Average, the current bull market is over 2,000 days old—2,074 to be exact. That is the fourth longest bull market in the last century. How have stocks fared once they have reached the age of 2,074?
In terms of duration, every bull market that has lasted for 2,074 days, went on to last at least another two years. And the subsequent gains for the three bull markets that lasted longer than 2,074 days were all substantial. That’s the good news.
The bad news is that the performance of stocks from day 2,074 of a bull market to the subsequent stock market low was uninspiring at best and disastrous at worst. The 1920s bull market led to the 1929 crash and the 1990s bull market was followed by the dotcom bust.
That’s not all the bad news though. The other bad news is that formulating an investment strategy on the basis of past performance isn’t a reliable (or advisable) way to manage an investment portfolio. Don’t overlook the fact that we are dealing with a sample size of exactly three here.
If you wanted to draw a more informed and statistically meaningful conclusion, you would look at the 35 cyclical bull markets that have occurred over the last century (or so) and discover that only three made it past the age of 2,074 days. That puts the odds of the current bull market lasting much longer at roughly 1 in 10. This is not meant to be a forecast, it is simply a statement about the historical duration of bull markets.
Jeremy Jones, CFA
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