Bull Market turns Six: What’s next?

Time flies when you are recovering from a housing boom and bust, a financial crisis and the worst recession since the Great Depression. Five years ago, stock market indexes bottomed out and began a new bull market that has charged through a Flash Crash, a rolling European financial crisis, the Arab spring, a few Congressional showdowns and the Polar Vortex. Over the past 60 months, the S&P 500 has gained a stunning 177 percent, and has more than tripled if you include dividends. After such robust performance, intrepid investors would be wise to ponder whether the end is nigh. According to the Stock Trader’s Almanac, since 1921, the average bull market lasted 62 months, while the median bull market extended for 50 months. The current bull’s performance matches that of the average performance of all bull markets during that time frame, which might make some feel like the sky’s the limit on the upside (we are well-above average, right?)

If you watch the financial media, every buy-side cheerleader is out there saying that the bull has legs and that 2013/2014 is lining up to be 1996/1996 redux: In 1995, the S&P 500 gained 37.2 percent, followed by a 22.7 percent increase in 1996, powered by a technology revolution. (In today’s scenario, just replace search engine and e-commerce with social media and apps.) These “pundits,” who often make a lot more money if markets rise, also point to the fact that in those years, there was a government shutdown and unusually bad weather in January – what a coincidence!

So should ordinary investors strap in and get ready for the rocket-ship ride higher in stocks? Maybe the bull market does have more room to run, but it might be wise to keep the celebrations at bay and stick to a diversified portfolio, just in case. The usual suspects are lurking beneath surface of the record-setting pace: retail investors are jumping back into the fray, like they often do at or near market tops; bearish sentiment and volatility indexes are dropping, signaling complacency; higher price to earning ratios are being discounted; and evidently enough time has passed for some to have forgotten the pain they endured in 2008 and 2009.

MARKETS:

• DJIA: 16,452, up 0.8% on week, down 0.7% YTD (UP 151% since 3/9/09)
• S&P 500: 1878, up 1% on week, up 1.6% YTD  (UP 177% since 3/9/09)
• NASDAQ: 4308, up 0.7% on week, up 3.8% YTD (UP 242% since 3/9/09)
• 10-Year Treasury yield: 2.79% (from 2.66% a week ago)
• Apr Crude Oil: $102.58, down 0.1% on week
• April Gold: 1338.20, up 1.3% on week
• AAA Nat'l average price for gallon of regular Gas: $3.49 (from $3.71 a year ago)

THE WEEK AHEAD:

Mon 3/10:

Tues 3/11:

10:00 JOLTS

Weds 3/12:

2:00 Treasury Budget

Thurs 3/13:

8:30 Weekly Jobless Claims

8:30 Retail Sales

8:30 Import/Export Prices

10:00 Business Inventories

The Senate Banking Committee considers the nominations of Stanley Fischer, Jerome Powell, and Lael Brainard for the Federal Reserve Board

Fri 3/14:

8:30 PPI

9:55 Consumer Sentiment