Aging Bull

In many ways, stock and bond performance in late September and October inversely mirrored the declines of late July and August. Volatility declined and selling pressure abated as stock indices rose and yield spreads declined. Late in the month, a flurry of positive earnings results from some of the technology giants drove the large cap growth sector close to all-time highs. The torrent of news headlines announcing an impending bear market has slowed to a trickle and we’ve noticed increasing numbers of “experts” suggesting that the recent turmoil might have been overdone, and in particular may have simply been a normal correction in a long-term bull market. This is an excellent opportunity to step back and take a broader look at historical market norms.

A popular measure of the United States stock market is the S&P 500.  A bear market in stocks is commonly defined as any decline from a recent peak that exceeds 20%, while a correction is a decline that exceeds 10% but stops short of a bear market, and a pullback is any decline of less than 10%. Since the current bull market began six and a half years ago in March of 2009, this index has experienced several price declines of note as shown in Table 1 below*:

Viewed in this perspective, the recent market decline was simply an average correction in the current long and continuing bull market and in and of itself does not indicate any change in market action from what has typified the post crisis recovery.


Taking an even longer term perspective of all S&P 500 bull markets since 1926 is also an interesting and useful exercise. Table 2 to the left shows show the gains of various bull (>20%) markets over the past 90 years while Table 3 shows the durations in months of these same market moves.

In summary, we can say that the S&P 500 remains in one of the longer bull markets on recent record. Recent market action to the downside since midsummer, doesn’t look out-of-place when compared to other price declines within the current bull market. However, the historical evidence suggests that we are closer to the end of the current bull market than to the beginning.