28 Nov 2019
Market Metrics: US S&P 500 Index
- Posted by Dejan Pekic BCom DipFP CFP GAICD, Senior Financial Planner
The current bull market is just nuts.
It has lasted over 10 years and has risen by over 400%.
A bull market is defined as a rise of 50% or more over a period lasting more than six months while a bear market is defined as a fall of 20% or more since the last peak.
In the following table we have detailed a brief history for the six biggest bull runs for the US S&P 500 index since 1962 and the crash following immediately afterwards (source Schroders).
| Period |
No. of Months |
Rise |
Reason |
Fall |
Reason |
| Jul-62 to May-70 |
77 |
143% |
President Kennedy promised to ‘get America moving again’. By 1966 the economy was strong and unemployment was 4%. |
33% |
Political instability and the Vietnam War coupled with a weakening economy and high inflation led to a minor recession and a bear market. |
|
|
|
|
|
|
| Jun-70 to Sep-74 |
31 |
68% |
In the early 1970’s McDonalds, IBM and Disney as part of the ‘Nifty Fifty’ helped carry the US stocks to new heights. |
44% |
Phase three of President Nixon’s economic plan triggered runaway inflation and caused stocks to fall. |
|
|
|
|
|
|
| Jul-82 to Nov-87 |
62 |
289% |
Reaganomics: President Ronald Reagan cut taxes, sending the stock market soaring. |
33% |
Relatively new computerised trading was partly to blame for ‘Black Monday’ when stocks fell 22% in one day. |
|
|
|
|
|
|
| Oct- 94 to Aug-02 |
71 |
266% |
The dawn of the Internet age brought prosperity. Economic growth and stable inflation drove the market higher. |
45% |
After recklessly buying so-called dotcom stocks, the bubble burst and stocks fell sharply. |
|
|
|
|
|
|
| Sep-02 to Feb-09 |
61 |
88% |
Low interest rates spurred excessive lending and the housing boom which triggered exuberant spending. |
51% |
The Great Recession. Falling house prices triggered a mass of defaults, causing banks who had made huge bets on the housing market to fail and the stock market plunged. |
|
|
|
|
|
|
| Mar-09 to Present |
128 |
405% |
Low interest rates and increased money supply support growth. The tech industry spurs the stock market rally. |
??? |
Unknown at this time. |
How long can it continue? No one knows is the answer.
The key for investors is to remain invested according to your appetite for volatility and when fear and panic take hold during the next financial catastrophe, to take advantage by buying more quality assets at discounted prices.
Click for chart.
At Newealth we are always looking to support and promote our clients wherever possible and if you have any ideas or comments, please feel free to email me or to call me on +61 2 9267 2322.
