Stock-Market Birthers Can’t Agree on Age of Bull MarketMichael P. Regan
Just how old is this bull market in U.S. stocks anyway?
Believe it or not, there is not universal agreement on the bull’s birthday. Many market watchers say it was born on March 9, 2009, when the Standard & Poor’s 500 Index reached the lowest point of the rout that followed the financial crisis. That would make it about 5 1/2 years old. Yet some, including Yardeni Research Inc. and strategist Jeffrey Saut at Raymond James Financial Inc., are in the camp that the bull hasn’t quite reached its third birthday yet.
Perhaps a better question is: does it matter?
The argument in favor of caring is that bull markets don’t last forever and it’s important to get the age right in order to size up the rally versus the lifespans of past bulls. The average bull market lasts about four years, according to data compiled by Bloomberg and Birinyi Associates Inc. That makes this rally either over the hill, or still only three-quarters of the average age. It’s either Tiger Woods or Rory McIlroy.
The point is open for debate because of the rather loose definition of bull markets. Merriam-Webster’s online dictionary defines one as “a market in which securities or commodities are persistently rising in value.”
Financial sites like Investopedia don’t offer more quantifiable clarification. (Though for the sake of water-cooler chatter, Investopedia does provide an interesting backstory that the idioms are a result of the way each animal attacks opponents: “A bull thrusts its horns up into the air while a bear swipes its paws down.”)
In general practice, most market analysts describe a gain of at least 20 percent from a low point as a bull market. The low must be the climax of a bear market, or a decline of at least 20 percent from a peak. Only a bear can kill a bull and vice versa.
This brings us to the enigmatic year of 2011. The S&P 500 dropped 19.4 percent that year from a peak on April 29 to a low on Oct. 3. That percentage compares closing levels on each day. However, comparing the intraday high on May 2, 2011, to the intraday low on Oct. 4, 2011, gets you a decline of 21.6 percent. After sorting out the whole U.S. sovereign debt mini-crisis, the index ended 2011 about four-hundredths of a point lower that its 2010 close. So yes, it does sort of feel weird to call it a “five-year rally.”
Getting back to the second question: “Does it matter?” The answer is no, not really, not this time. Wall Street tends to be obsessed with averages, even though it’s universally believed that Wall Street is a place of above-average intelligence, wit, good looks, humility and sarcasm.
Yet the bear market that was killed in 2009 was far from average. It stands to reason that any bull markets to follow are unlikely to be “average.”