The US stock market has been in a bull market for over 11 years. When the current bull market started, Facebook (FB) had just edged out MySpace as the No. 1 social network but still hadn’t made a profit, and Apple (AAPL) was about to release the iPhone 3GS, states Nell Sloane of Capital Trading Group.
That was a long time ago, and that’s plenty of time to get the feeling that stocks are always in a bull market. In late 2018, stocks crashed when the yield curve inverted. Although an inverted yield curve sounds like something that requires surgery, it’s actually a signal that the economy is probably doomed. But not this time. Stocks were back to new highs in about five months, then Covid hit and the global economy was shut down. Could that end the bull market? Nope. Not as long as you don’t care if five-10 stocks are driving most of “the market.” A global pandemic could only keep the S&P 500 (SPX) down for about six months. So, stocks not only recover from crashes, but it’s now measured in months.
The history of the stock market, and I mean the LONG history, is a series of bursts interspersed with long flat periods (10+ years). The “flat periods” aren’t typically flat, but I’m just looking at how long it takes to start making money again once a bull market is done.
The last flat spot was 2000-2010, and it only took about $5-6 trillion of Federal stimulus to keep the latest bull market fueled. That will end someday, so it probably makes sense to look at how various portfolio configurations have done over the last 20 years, which includes both a flat spot and a burst (sorry for the technical jargon).
JP Morgan conveniently put out a report recently showing 20-year annualized returns. Here are some results (1999-2019).
Bonds: 5.0%
S&P 500: 6.1% (total return; dividends reinvested)
60/40 Portfolio: 5.6%
40/60 Portfolio: 5.4%
REITs: 11.6%
Average Investor: 2.5%
If you owned some foreign stocks as part of a 60/40 portfolio (60% stocks/40% bonds), you did a little worse, and if you made any timing moves that weren’t perfect it’s very easy to fall into the average investor group.
It may be a little surprising to know that after one of the longest bull markets in history, the S&P 500 has only returned 6% for the last 20 years.
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Learn more about Nell Sloane by visiting Capital Trading Group
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