Later this month, this market may just take over the title of longest bull market ever (although, mind you, not the most profitable), displacing the previous record-holder, which is the October 1990 to March 2000 bull market under Presidents George H.W. Bush and Bill Clinton.
However, since all good things do come to an end, this stampeding bull will eventually transition into a growling bear.
So here’s a few questions to ponder.
When is the bull likely to end? And how best to invest in what may be the final innings of this market?
The end of the bull
No one knows, of course, when the bull market will meet its end. But for now, most market strategists believe the bull will likely stay on its feet until mid-2019 to mid-2020.
What happens at that point? Odds are that by then, several negative economic trends will reach critical mass and create the conditions for a recession.
Those trends include rising interest rates which start to choke off further economic expansion; rising prices, wages, and trade frictions; a growing U.S. government deficit which becomes more expensive to service as rates rise; ballooning Social Security & Medicare obligations; labor shortages and crimped productivity due to inadequate labor supply and insufficient investment in infrastructure and innovation; and corporate earnings which, after reaching a sugar-high peak following the 2018 tax cuts, may have nowhere to go but down.
Still room to run
Of course, no one is seeing the signs of recession yet, and since forecasting is notoriously imprecise, the recession could in fact come sooner or later, and prove to be devastatingly deep or nothing more than a shallow pullback.
That’s why market historians make a point of reminding us that the final stages of a bull market can still be very rewarding for investors. You really don’t want to bail until the end of the show.
What lessons should we keep in mind as we get closer to the end of the bull market?
Maintain a disciplined and diversified portfolio. That means sticking to your allocation and keeping a long-term perspective, with exposure to currently less-favored assets like international and value stocks. Diversification can help control volatility and keep you focused on out-of-favor assets that have more room to increase in value. Don’t fool yourself trying to “time the market.” More people got hurt in 2008 by bailing out – and staying out too long – than by staying invested and patiently awaiting the rebound.
Don’t panic every time there’s a bump in the road. “We believe the secular bull market in the United States remains intact, but pullbacks are likely,” say market strategists at Schwab. Investors need to have realistic expectations. Not every month will be up, and dialing back the risk might mean settling for lower returns. Decide what risk profile is right for you, and stick with it.
Easy does it. Now’s probably not a good time to follow a “pedal to the metal” investing strategy. In fact, it might be time to take some risk off the table. For most of the people we work with, the objective is to securely reach their life’s financial goals with a comfortable level of risk. We’ve guided clients through good and bad markets, and multiple recessions, so we know what works and what doesn’t. We can’t control the market, but we can create a portfolio and financial strategy for you that helps ensure your success.