Is it the end of the longest bull market in history?
On 22nd August, the US stock market delivered the longest bull market in history. This marked a period which began on 9th March 2009 after the markets had begun to stabilise following the financial crisis, and has run ever since. Over this time, the S&P 500 share index which tracks the 500 biggest public companies in the US, has performed consistently well, rising by 323%. Even more impressive is the fact that UK investors, who had dividends reinvested, have seen returns of 418%. Laith Khalaf, senior analyst at Hargreaves Lansdown, commented that, “UK investors in US stocks have done particularly well from a combination of strong stock market returns and a weakening of the pound against the dollar.”
This lengthy bull market has been caused by a number of factors. First of all, it was supported by a recovery in the US economy and growth in company earnings, which is always an important driver in share price growth. In addition, valuations, investor confidence and low competition from other investments also contributed.
Donald Trump also did his bit to help by announcing a $1.5trn tax cut which boosted corporate earnings even further and encouraged more share buybacks. With interest rates being so low, companies have had plenty of spare cash to buy back their own shares.
The obvious question is how long can this bull market realistically last? Is it nearing the end of its run? Will the contributing factors above run out of steam? On the face of it, with US interest rates still low by historic standards and corporate earnings rising, conditions for further growth remain good.
The UK stock market has also performed strongly since 2009, despite one or two blips in 2015 and 2016 which were relatively short-lived. In fact, it is more reasonably valued than the US one at the current time.
As ever, there are risks to the global economy which could mean the bull run could be coming to an end. Back to Trump, the talks of impeachment or the potential escalation of the Trade War could damage the healthy economic outlook. A strong Democratic performance at the forthcoming midterms could create uncertainty which markets tend not to like.
So as an investor, what is the most sensible course of action? It’s impossible to predict the future and trying to time the market is notoriously difficult. Instead, it is better to take a long-term view and ride out any short-term volatility or market correction. Protect your wealth by diversifying your assets and consider setting up a monthly investment plan to keep your savings ticking over while benefiting from any dips in the market. Underlying all the hyperbole and speculation, there are certain markets that remain undervalued by historic standards and so present the opportunity for further growth.
If you’d like to talk to one of our consultants about your current investment strategy, do get in touch here.
The value of your investment may go down as well as up and you may not get back what you initially invested.
Craig Harrison is Managing Director for Creative Wealth Management, having joined Creative Benefit Solutions in 2008. He is among the highest qualified advisers in the country, holding the title of Chartered Financial Planner in addition to the Investment Management Certificate (IMC). When not working, Craig is an occasional runner and cyclist which helps combat his love of food, especially cheese and red wine!