Human beings are obsessed with setting records.
The fastest. The strongest. The first. The longest. It’s exciting whenever a new record gets set. It makes us feel like we’re witnesses to something important, something historic. Something we can tell our grandchildren about. And now, we can add a new record to the list:
The Longest Bull Market in History
You’ve probably seen the news. On Wednesday, August 22, many media outlets reported the U.S. stock market had set a new bull market record of 3,453 days.1 This incredible stretch, which by most estimates began on March 9, 2009, surpassed the previous record set in the 1990s.
But here’s the thing about records. Sometimes they matter. Sometimes they don’t.
Does this record matter
I believe the answer is… “No!”
Here’s what we know: The stock market has been going up for a long time now. Sometimes slightly, sometimes sharply, but always up. Let’s say all the experts got together and decided we aren’t in the longest bull market in history. Would that change the fact that stocks have been going up for years? Would it change the performance of your own portfolio?
No, it wouldn’t.
So what matters is not that this is the longest bull market ever. What matters is how we react to a long bull market like this one.
What goes up must come down. It will end eventually.
On the other hand, just as it’s easy for investors to get complacent, it’s also easy for investors to get skittish. That’s why an equally bad mistake would be to think, “Oh, this bull market has gone on for too long. It’s probably going to crash any week now – time to get out!”
Nope. The markets don’t work that way.
Here’s what will happen
As I mentioned a couple weeks ago, the market can behave like cyclists in the Tour de France. Riders tend to pack together in groups the announcers call the “peloton.” Winners will pull ahead of the peloton, while riders who struggle with the grueling pace will lag behind.
This same principal can be applied to the markets, with the peloton represented by the broad, capitalization-weighted market. As this large group of hundreds of stocks and funds winds its way around curves, through valleys and over mountains, many stocks and funds will behave quite similarly. However, there will be funds and sectors that break away from the pack for sustained periods of time, others that fall well behind the pack, and a few that inevitably fall out of the race altogether.
No one should abandon ship the moment they get a little wet.
The point is to not overreact
Some records matter. Some don’t. And the stories they tell can be very subjective. That’s why we don’t overreact to them. Here’s what we do instead:
- We continue with our strategy; identifying the funds, sectors, and asset classes that have the strength to pedal beyond the comfortable confines of the peloton and avoid those that lag behind or fall out of the race.
- We don’t allow ourselves to flinch at every market wobble.
- Our investment strategy is not based off headlines, storylines, records, or milestones.
In the meantime, if you’re worried about what will happen when this bull market ends, that’s okay. Just focus on what you can control. Focus on paying off your house, setting up an emergency fund, or helping your children or grandchildren pay for college. Take care of the things that matter now.
Human beings tend to be obsessed with setting records. But here at Wealth Advisors, our job is to help you set goals – and then work toward achieving them. Whether we’re in the longest bull market or not, that’s what we intend to do.
As always, if you have any questions about the markets, or about your portfolio, please let us know! We love to hear from you.
