What to make of the current bullish market? The stock market continues to rally while unemployment remains high, job creation is weak, rising costs of oil and food are taking a large bite out of disposable income, and there are increasing concerns about inflation.
Meanwhile the S&P 500 recently grew 100 percent from the level it fell to during the depths of the financial crisis in March 2009, the fastest such doubling in the index’s history, Time magazine observed. This is the 12th longest bull market since the crash of 1929.
According to the Seeking Alpha website, this bull market has already been sustained for longer than the bear market that preceded it and lasted from October 2007 to that fateful March 2009. Since 1928, the website charted, the average bull market lasts 915 days and has historically lasted three times as long as the average bear market (310 days). Since 1940, the average bull market has lasted more than 1,600 days, which is about 2.5 times as long as the one in which we are currently.
Will history repeat itself? While some analysts sound a cautionary note, referencing, for example, the dire financial straits of 100 U.S. cities that could go broke and default on their debts this year, Bloomberg recently reported that sustained economic growth from global markets will more than make up for threats to the market, ranging from the earthquake in Japan to the turmoil in the Middle East and North Africa. “The U.S. economy looks like it’s on solid footing and earnings will continue to grow, Joseph Keating, the Birmingham, Alabama-based chief investment officer at CenterState Wealth Management told Bloomberg.
But market strategist Robert Prechter, has a different, and bleaker view. His prediction to the New York Times last summer of a monumental market crash has not come to pass, but he does insist that a catastrophe is coming. “This market,” he told the Times recently, appears much more dangerous today than it was last summer.”
Prechter takes his cue from Ralph Nelson Elliott, an accountant who found repetitive patterns in the stock market of the 1930s and ‘40s. The market, Prechter told the Times, stills moves in large and small cycles based mainly on “social mood,” which in turn, influences the economy. “We are in a long-term bear market that started in 2000,” he said. “I believe deeply that opting for maximum safety is the right thing to do. Bulls are about to lead people over a cliff.”