I was speaking with a friend who asked why 48%why not 100% cash?

The short answer is that we are seeing some signs of a pullback, but not necessarily anything more ominous. Additionally, the 3rd year of a Presidency has lots of tailwinds in it for the markets.

But the longer answer is a bit more nuanced. Have a look at the chart and table below, from Jim Stack of Investech Research. The Bull Market Duration chart shows that in terms of overall rallies, the present run is not too long in the tooth. This present run is not yet two years old, about half of the average length of rallies over the past century. I read this as suggesting longer term investors can stay long(ish), so long as they have risk discipline in place:

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My concerns are a bit more over the short term. The second table shows just how fast and far this market has run.

At 90% gains, this market has run further and faster than any previous rally. Indeed, in just 20 months it has far outpaced every other rally’s 24 month record by some 50%; the next closest gainer was 65.7% .  That does raise some cause for concern short term:

All charts and tables from Investech Research

Category: Investing, Markets, Technical Analysis

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

19 Responses to “Bull Market Duration and Strength”

  1. nofoulsontheplayground says:

    I think it’s more relevant to compare the current cyclical bull market with those from 1932-1947. The 70-year cycle suggests that is the prudent choice. When placed in that perspective, the 1.8-year length of the current move is close to average and above the median for that period.

    The 3rd year of the Presidential cycle is the fly in the ointment, but it’s interesting that it was last skewed about 70-years ago.

    I’m still leaning towards a correction into the summer followed by a move up into the end of the year. However, current patterns suggest we are in the midst of a drop that may take the SPX to 1200 by early February.

  2. machinehead says:

    James Stack has broken up the gigantic 1932-1937 bull run into multiple segments, since it was very volatile and included several 20%-plus drops.

    But if it’s treated as a single five-year rally, the price-only gain from the June 1932 low to April 1934 (22 months out) was 129%, according to Professor Shiller’s data.

    Partly this illustrates how sharply an extremely oversold market can bounce back. But even after its 57% drop into March 2009, the S&P was not nearly as clapped-out oversold as it was in June 1932 — not by a long shot. So the S&P’s liquidity-fueled 90% gain in 22 months is rather overdone, and in need of a reality check.

    The year-to-date gains will turn to losses sometime in February, I expect.

  3. [...] A look at historical bull markets. (Big Picture) [...]

  4. b_thunder says:

    With all due respect, the comparison to the prior bull markets and any other comparisons are meaningless, and may prove very costly. Why meaningless? Because this bull market (or “bull” market) is happening under the unprecedented conditions of Fed’s QE, government reckless borrowing, and zombie-banks not accounting MTM. These are major factors that have been driving this market that have never before been employed to this extent. I’m not saying that this market can’t continue (nobody knows when Dr. Bernanke will cease printing,) i don’t think it’s prudent to make any conclusions based on the data from prior cycles.

    BTW, like your friend i’m 100% in cash. luckily, i’m not managing OTM, so i don’t have to beat the average or the crowd :)

  5. globaleyes says:

    Some people have called this rally the biggest of their lifetime. These same people say now is the time to get underneath this market.

    (gulp)

  6. KC says:

    I don’t get what creates a “bull market”. Between 1977-1978 the S&P fell 20%. In 1998, the S&P fell 20%. Yet these are in the MIDDLE of the “bull markets” listed above. Why not just throw the entire 1982-2000 period into one giant bull market, and say we’re only 1.8 years in, whereas there has been an 18 year bull market in the past.

  7. jbp60606 says:

    Barry – what do you consider “fully invested” – i.e., your minimum cash position? What has been your lowest cash position during the rally? I have heard some traders say be 50 % cash at all times, others say 5-10%. How about you?

    ~~~

    BR: There is some tricky math involved, but I consider 0% cash fully invested

  8. JohnnyVee says:

    IMHO, With near 0% rates in U.S.A and massive EU lending, QE I, etc. This “recovery” is different.

  9. KC says:

    Also, I don’t have the data for the S&P before 1950, but the DOW went from 1947 to 1962 without a drop of 20% or more. So that’s a 15 year bull market. But if we’re using 25% to measure a bull market, then that takes us to the bull market from 1942-1970…28 years. But I would prefer to use a 60% correction as the end of a bull-market, in which case we’re currently in the middle of an 80 year bull market.

  10. anonymous says:

    There is some tricky math involved, but I consider 0% cash fully invested

    you are a funny guy BR

  11. Patrick Neid says:

    This rally continues to add to the mantra of “don’t fight the fed”. The bigger the fed footprint the bigger the rally. How long it lasts is another discussion.

  12. investor says:

    Bloomberg’s FoA request got a response from the Fed stating they had ‘loaned’ $7 TRILLION to 4 major us banks and some foreign banks. The vast majority was to the US banks, the one most favored foreign bank/brokerage was UBS. Bernanke statedflatly that the intended prupose was to go into buying stocks.

    He said that QE1 had been sucessful in bouying the markets and that he expected QE2 would be as well.

    In short, $7 Trillion from the FED is what has floated the market despite an atrocious economy and massive unpayable debt at every level (city, county, state and federal). Very soon the Fed will no longer be able to continue the QE fraud. When it happens, the bottom falls out of the markets. And the fall will be fast. If the Republican House blocks or strangles the raising of the debt ceilin, the trapdoor will open instantly.

    Asset valued stocks will not be immune to this as their underlying assets have been grossly inflated also.
    While they may take a lesser hit, someone hit with a hammer doesn’t necessarily feel better than someone hit with a crowbar.

    If the House blocks the debt limit increase, SELL!

  13. investor says:

    The Fed recently stating they had ‘loaned’ $7 TRILLION to 4 major us banks and some foreign banks. The vast majority was to the US banks. Bernanke stated flatly that the intended prupose was to go into buying stocks.

    He also said that QE1 had been successful in bouying the markets and that he expected QE2 would be as well.

    The $7 Trillion from the FED is what has floated the market despite an atrocious economy and massive unpayable debt at every level. Soon the Fed will no longer be able to continue the QE fraud. When it happens, the bottom falls out of the markets. And the fall will be fast. If the Republican House blocks or strangles the raising of the debt ceiling, the trapdoor will open instantly.

    Asset valued stocks will not be immune to this as their underlying assets have been grossly inflated also.

    If the House blocks the debt limit increase, SELL!

  14. philipat says:

    Would it not be more appropriate to look at the bigger picture? On that basis, we are in a secular Bear market that began in 2000 and, if history repeats, will end around 2018. Big Blue chip stocks of the United Corpoartocracy of America’s finest are fine because the earnings are from the Emerging markets and these Companies manufacture almost exclusivley in Asia, where wages are USD25/Week instead of /hour and the earnings stay offshore to evade US taxes. Is that a great situation or what?

  15. [...] chart from Barry Ritholtz over at The Big Picture looking at Bull market runs from the bottom of the market. As you can see the average is 3.8 years [...]

  16. [...] discussion of the intensity and duration of bull markets — and the current powerful market — led [...]

  17. HarleyHoward says:

    Like the others, I am curious. What does Barry think about the effect of QE I & II on the “bull market” run – and when does this bubble burst?

  18. [...] A look at historical bull markets. (Big Picture) [...]

  19. [...] the past few weeks, we have taken several looks at the duration and intensity of this rally (see this, this and [...]