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Home > Blogs > Markets trends: bullish, but how long?

Markets trends: bullish, but how long?

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Submitted by Your Personal CFO - Bourbon Financial Management on October 4th, 2019

Markets Trends: Bullish, But How Long?

 

Some of you have recently asked for our opinion on the financial markets and trends. Let me present here our view.

As you can see on the chart in the pdf file attached, the S&P 500 has almost doubled (close to +100%) since its bottom on March 9th, 2009 (24 months). Also note that the average bull market lasts 57 months with a 164% average increase.

The current rally represents the 3rd greatest percentage gain for any 23 month period in the index’s history (chart attached as of 02/2011). It was preceded by the 2nd worst 23 month drawdown, only bettered by the 1929 – 1932 crash and the index is still actually lower than it was 46 months ago (it closed at 1445 on April 9th 2007), meaning that this drawdown is yet to be fully repaired, while both corporate earnings and outlooks are much healthier at present.

 

 

 

Bull View 

The market should continue to rise in the next couple of years due to good valuation vs. bonds/cash, the market has a free cash flow yield close to 7%, which is the highest in history and balance sheets and has never been better. 

Furthermore, confidence, consumer spending, hiring, and the availability of credit are increasing and equity funds would see inflows.

 

Bear View

Structural issues in our economy like debt, unemployment, real estate prices would most likely persist. Rising oil and commodity prices may be due in part by the additional liquidity provided by the quantitative easing 2 of the Federal Reserve

 

 

Overall View  

As a believer in reversion to the mean, we think that the next decade should be a positive one for stocks though return opportunities are not what they were two years ago.

For the next three to five years, returns on an annualized basis may not be as good as the last two years. There will be corrections which should create opportunities to increase our equities exposure. So while we think that returns will remain positive, volatility will be present.

 

Click here to get more details!

 

This newsletter was first published in March of 2011

http://bourbon-fm.com/file/BFM_Newsletter_03_2011_Markets_Trends.pdf