March 2017 Market Insights

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    by Linda S. Parenti, CFA
    President & Chief Investment Strategist

    Yesterday marked the eight-year anniversary of the current U.S. equity bull market. As a refresher on terms, a bull market is a 20% or greater increase following a 20% or greater drop in the price of a market index. While “corrections” or “pullbacks” occur during bull markets, unless they pass the 20% decline mark from the previous closing high, the bull market is still considered ‘alive and kicking.’ This bull market ranks as the second longest and, as measured by the S&P 500, has gained from its start a cumulative 314% in total return. The longest bull run in history lasted just over 12 years from December 1987 to March 2000, so this one still has a long way to go to take first place in length of time.

    Why has this one lasted so long? I believe at least one reason is fear. This has been dubbed the most ‘unloved’ bull market in history. Today’s investor carries the memories of the bear market that hit in October 2007, which was especially hard and lengthy. Because the economic recovery that followed exhibited below average growth, it also took longer than average for stockholders who stayed invested to see their dollars break even. It hit a baby boomer generation who were just at a point when their retirement years were coming into view and appears to have produced a permanently heighted level of risk aversion among individual investors.

    Famed investor Sir John Templeton said, ‘bull markets are born on pessimism, grow on skepticism, mature on optimism and die on euphoria.’ For years, pessimism and skepticism have been common investor themes. More recently, optimism seems to be building. Still, there remains a high degree of doubt among individual investors. As reported by the American Association of Individual Investors, bullish sentiment this week has fallen to 30%, while bearish sentiment surged to over 46%. In fact, the bullish camp has not led the sentiment readings in over two years. That equates to a good deal of cash sitting on the sidelines.

    Combine that cash with an economy showing definite strength and I would suggest this bull market may not be finished yet.

    Views and opinions expressed here are for informational and educational purposes only and may change at any time based on market or other conditions or may not come to pass. This material is not a solicitation to buy or sell securities and should not be considered specific legal, investment, or tax advice. The information provided does not take into account the objectives, financial situation, or particular needs of any specific individual. All investments carry a degree of risk and there is no certainty that an investment will provide positive performance over any stated period of time. Equity investments are subject to company specific and market risks. Equities may decline in response to adverse company news, industry developments, or economic data. Fixed income securities are subject to market, credit, and interest rate risks. As interest rates rise, bond prices may fall. Past performance is no guarantee of future results.