What Does the Longest Bull Market Mean? A Debate

There’s lots of disagreement about whether the current bull market in stocks is now the longest in history. Bloomberg Opinion columnists Nir Kaissar and Barry Ritholtz recently met online to debate its longevity, whether it matters and if anyone should care. They previously discussed passive versus active investing and global equity valuations

Nir Kaissar: The U.S. bull market became the longest on record yesterday. It’s been 3,453 days since the market hit bottom in March 2009, surpassing the run that began in October 1990 and ended when the dot-com bubble burst in March 2000.

Or did it? According to Yardeni Research Inc., the bull market that ended with the dot-com bust began in December 1987 — not October 1990 — and lasted 4,494 days. By that count, the current bull market won’t steal the record for another three years. And that assumes this bull run began in March 2009, a claim that Barry will undoubtedly contest.

It’s tempting to wave this away as frivolous banter among market historians. But that’s a mistake because this debate is about the future, not the past. By asking whether this bull market is the longest in history, investors are really asking whether it’s near an end.

It’s an unavoidable question. Underlying most portfolios are so-called capital market assumptions — estimates of how various investments will perform in the future. Those assumptions have a big impact on how the portfolio is constructed.

Which inevitably raises more questions: Does the length of a bull market say anything useful about the future? And are there more reliable ways to forecast what’s ahead?

Barry Ritholtz: I am fascinated by this topic! Over the years I have spent a lot of time thinking and writing about it (see this).

I have found the conventional wisdom on determining the age of bull markets to be mostly wrong. No, bull markets do not begin from bear market lows. If this bull began in March 2009, then did the postwar rally from 1946 to 1966 actually begin in 1932? Did the 1982-2000 bull market start at the bear-market lows in 1974? Of course not — but that’s where the claim this bull market began in March 2009 leads to.

When did this bull market actually start? There are many ways to measure a bull market, but the most reasonable way is from when it makes new all-time highs. In this case, that means the start of this bull market was March 2013. The recovery from the financial-crisis lows, retracing the plunge from October 2007 to March 2009 is not, in my opinion, part of the bull market.

So no, bull markets don’t start at bear-market lows.

There are other ways we can debate the issue of whether or not this is the longest bull market ever, but perhaps we should discuss an even more important question: Does it really matter?

Bull markets do not simply die of old age; they don’t reach a certain length, and then keel over. What kills them are things that hurt corporate revenue and profits: high credit costs that makes borrowing costly, or inflation that makes input costs like natural resources, energy and labor more expensive. Or just a good old-fashioned recession — and even those don’t always kill the bull.

Continue reading “What Does the Longest Bull Market Mean? A Debate”