Happy Anniversary! Long-Running Bull Market Celebrates 10 Years

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March 9 was the anniversary of a financial event that few people foresaw a decade ago. On this date, the longest-running bull market in U.S. history turned 10 years old.

The decade-long stock market rally has generated a gain of almost $18 trillion in the market value of the S&P 500 Index, which has more than quadrupled in value over this time. On March 9, 2009, the S&P 500 closed at 666, down 45 percent over the previous six months. Today, the Index stands at 2,786.

What Led to the Bull Market?

There are many different factors that have contributed to the record bull market, but among the most often cited reasons are historically low interest rates and inflation and strong corporate profits. The Federal Reserve started lowing interest rates in the aftermath of the Great Recession and financial crisis, effectively bringing rates down to zero by mid-2009 in an effort to stimulate the economy.

The Fed also purchased more than $4 trillion in government bonds and mortgage-backed securities during this time to help boost the economy, a monetary policy referred to as quantitative easing, or QE. In late 2015, the Fed began gradually raising interest rates and shrinking its bond portfolio as the economy found its footing.

While some economists and investors were worried that QE would cause inflation to spike, this hasn’t happened so far. After hitting 3 percent in 2011, inflation fell below 1 percent in 2015 and has remained right around the Fed’s target level of 2 percent over the past few years.

Another positive factor has been the absence of any serious external shocks to the system over the past decade, such as a major terrorist attack or financial crisis. And the corporate tax rate cuts that were part of tax reform legislation that was passed at the end of 2017 have helped stimulate further growth in corporate earnings.

Lessons Learned

Here are five lessons investors can take away from the long-running bull market.

  1. Maintain a long-term perspective. Over the long term, stocks tend to outperform bonds and cash equivalents, but they can be volatile in the short term. So you should generally view money invested in the stock market as long-term funds that you won’t need to touch for at least five to 10 years, such as retirement savings.
  2. Determine your risk tolerance. The stock market plunge that occurred in 2007-2008 forced many people to reexamine their level of investing risk tolerance. If you’re the kind of person who loses sleep at night worrying about your investments, you might want to adopt a more conservative asset allocation mix that’s lighter on stocks and heavier on fixed-income securities and cash equivalents. On the other hand, if you are emotionally prepared to weather stock market volatility — including drastic drops like we saw in 2007-2008 — then you may be more comfortable with a higher allocation of stocks in your portfolio.
  1. Don’t try to time the market. It’s easy now to look back on the past decade of stock market performance and say, “I should have put all my money in stocks in the spring of 2009!” But it’s probably safe to say that after watching the S&P 500 fall by nearly half in just six months, there weren’t many people thinking this at that time. The fact is, nobody knows what the future holds for the stock market. This makes trying to time the market by “buying low and selling high” a fool’s game for most people.
  1. Automate your investing. This is the antidote to trying to time the market. Instead of buying and selling stocks based on what you think the market will do in the future, set up an automated investing plan in which money is transferred directly into your investments (such as your 401(k) or IRA) each pay period. This concept is sometimes referred to as “paying yourself first.” When a portion of your pay is automatically invested, you aren’t tempted to spend it — because you never even see it.
  1. Don’t sell stocks out of fear. This might be the most important investing lesson of all from the past decade. The massive stock market selloff that occurred in 2007-2008 caused many people to cash out of stocks for fear of losing even more money. Those that did missed out on the tremendous run-up in stock prices that has occurred since.

Go back and read lesson #1 again. It’s critical to have a long-term perspective when investing in the stock market.

Please contact us if you would like to discuss your investing strategies in more detail.


The commentary is limited to the dissemination of general information pertaining to Frontier Wealth Management, LLC's ("Frontier") investment advisory services. This information should not be used or construed as an offer to sell, a solicitation of an offer to buy or a recommendation for any security, market sector or investment strategy. There is no guarantee that the information supplied is accurate or complete. Frontier is not responsible for any errors or omissions, and provides no warranties with regards to the results obtained from the use of the information. Nothing in this document is intended to provide any legal, accounting or tax advice and Frontier does not provide such advice. This information is subject to change without notice and should not be construed as a recommendation or investment advice. You should consult an attorney, accountant or tax professional regarding your specific legal or tax situation.

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