The roaring twenties. The booming sixties. The Asian tigers of the 1970s and 1980s, and the dot-com bubble of the 1990s. Every investor is well aware that there have been some great bull markets over the past 100 years, all of which have made a lot of money for anyone smart enough to get in early.
But 2009-2018? Really? Lots has been written about how we are in the middle of the longest bull market in history on the grounds that stock markets have risen for nearly a decade without a significant reversal.
Trouble is, it doesn’t feel like a bull market. True, it has been ten years since the last major collapse. But there have been corrections along the way and although prices have risen for a long time, they are not up by much. There is a genuine bull market record about to be broken, but it is on the tech-heavy Nasdaq index, not in wider global stock markets.
The arrival of the ‘longest bull market ever’ certainly prompted lots of excitable coverage. On 22 August, the S&P 500, still the key global index, notched up 3,453 days since a major correction. The index touched a low point in March 2009, when — with the global financial system crashing day by day — investors were selling as fast as they could. But since then, it has risen steadily. It has now overtaken the last great upwards surge in share prices, which ran from October 1990 until March 2000, the month when people started to wonder if the internet start-ups they had paid a fortune for were all they were cracked up to be. (A few were, like Amazon; most definitely weren’t.) In terms of sheer durability, all the other bull markets have been put in the shade.
Yet anyone who remembers the 1990s bull run, or has read up on the go-go 1920s, will have noticed something odd. It certainly doesn’t feel as if equities have done that well. There is no popular enthusiasm for owning shares. No one is launching TV shows tipping tiny AIM companies, people are not yakking on about how much money they have made from day-trading at dinner parties, and there are no pictures of oily young brokers cavorting in nightclubs in the tabloids. Every other bull market in the past has witnessed a euphoric, blow-out stage, where everybody piles into equities, and tons of money is made. So far, we haven’t seen anything of that sort. There are two reasons for that: the epic bull run is not as impressive as it seems and the real price action has been elsewhere.
Yes, it’s gone on for a long time, but when you measure this bull run by strength, it does not look so strong. The S&P 500 is up by 321 per cent since that low point in 2009. That is not bad, and if you’d told anyone in the spring of that year that they were likely to quadruple their money over the next decade they would have been pleasantly surprised. But it does not compare with the 421 per cent that stocks gained in the 1990s, and it is less even than the 325 per cent they managed to put on in five years between 1932 and 1937. By those standards, it is tepid.
Along the way, there have been some hefty corrections. The standard measure of a bull market is in fact fairly arbitrary. It is defined as a continuous upward move in share price, without a 20 per cent pull-back along the way. And while that figure has not been breached for the S&P 500, the index did suffer a 19.39 per cent drop in 2011. Another few points down, and that would have been a bear market, and no one would be able to call it the longest bull run ever.
And, of course, the FTSE100 dropped by more than 20 per cent between 2015 and 2016, the last plunge driven down by our decision to leave the EU. It will be a long time before Britons are celebrating a long bull run. In reality, the milestone reached by the S&P this year is just a statistical fluke. Moreover, the bull market has more or less stalled. The S&P 500 hit its all-time high in January, then went down again, and only reclaimed that level in August. After a rally following Donald Trump’s election, it has spent much of this year going nowhere.
The real price action is elsewhere. We have already seen a dramatic boom and bust in Bitcoin and other cryptocurrencies, with prices soaring into the stratosphere before crashing again. More significantly, and less widely noticed, there has been a genuine bull run on the Nasdaq, the New York index that is home to most of its booming internet and technology companies. It has been rising continually for more than 3,500 days, breaking the previous record for that index (a mere 2,800 days, set back in the 1980s when only a few techno nerds had heard of the web).
At the same time, it is closing in on a record in terms of strength. It is up more than 650 per cent since 2008, and it could soon overtake the 787 per cent rise in prices that came to an end in 1998. That is a bull market. A lot of money is being made, and there is some genuine euphoria around it. Indeed, the strength of the Nasdaq reflects the fact that this run-up in prices is about technology, and American technology in particular.
There have been some solid gains in equities. But this isn’t the ‘greatest bull market’ in history by any reasonable measure. The real gains have all been in American technology companies, which have soared in value and which have dragged the rest of the global equity indices up with them. Maybe it will turn into a real bull market — but there is still a long way to go before it can start to challenge the great bull markets of the past.