By: Paul A. Werlin, President, Human Capital Resources, Inc.
According to many investment professionals, the current bull market for stocks began way back on March 9, 2009 at the height of the housing crisis bubble. Back then, the Dow Jones Industrial Average was about 6,600 points- now it’s about 31,000! That in increase of almost 250% or about 21% per year. This is now the longest bull market in US history. And over the same period, the yield on 10-year US Treasury Bonds has declined from an average yield of 3.36% in 2011, to about 1.40% so far in 2021.
History tells us that neither bull markets, nor bear markets last forever — but are there any signs that the current bull market is ending?
The short answer is no. A bear market would mean a drop of at least 20% in stocks, and right now, there’s no sign of that happening anytime in the immediate future. To the contrary, with the US Federal Reserve keeping interest rates low, inflation hovering around 1.4%, and the Government finding ways to stimulate the economy to counteract the effects of the pandemic. Most professionals don’t see stock prices falling appreciable in the near term.
There are many economists predicting a very strong recovery to the US economy when the pandemic is fully under control, which looks like it could be as early as this summer or fall. However, the growing US debt is starting to have some cause for concern, and we have seen interests rise slightly over the past few months. Of course, no one can predict the future — global conflicts, new epidemics, natural catastrophes and so many other unforeseen events can happen that can significantly impact the markets.
The consensus is that stock investments (including mutual funds and exchange traded funds that invest in US companies) will continue to do well. However, it’s still prudent to have a well-diversified portfolio and keep a watchful eye, particularly on interest rates and inflation. And it’s always a good idea to talk with an investment and tax professional to get the advice you need for your particular circumstances.
Make no mistake, eventually this bull market will end. But for now, if you’re invested, the best advice is to stay invested. And if you’re not, you should be. Get started with a small investment or contribute to an IRA. It’s never too late.