Want to start an argument on Wall Street? Just ask when the current bull market began.
“Hold the champagne! This is not the longest bull market on record or since WWII as the current buzz on the Street would have you believe,” wrote Jeff Hirsch, editor of the Stock Trader’s Almanac, in a blog post.
Indeed, many investors are geared up to celebrate the “longest bull market” in history on Aug. 22. On that date, barring a catastrophic selloff, the S&P 500 SPX, -1.17% will have avoided a decline of 20% or more on a closing basis for 3,453 calendar days going back to the index’s bear-market low on March 9, 2009, in the midst of the worst global financial catastrophe since the Great Depression.
Read: The stock market is about to make history
As Hirsch’s post illustrates, that calculation doesn’t sit well with some analysts, though not always for the same reason.
For example, Sam Stovall, chief investment strategist at CFRA, noted objections that argue the current bull would have to run until April 3, 2021, to claim the crown. In this case, the rub doesn’t have to do with dating the start of the bull market back to March 2009. Instead, it hinges on the contention that the 1990s bull market actually ran longer than it is widely credited.
A bull market is seen as ending when stocks fall 20% or more from a cycle high. The market’s pullback from July 16 to Oct. 11, 1990 was only 19.9% on a closing basis, so sticklers would argue that the move should be classified only as the “deepest of corrections, not a bear market,” Stovall said. By that measure, the bull cited as beginning in October 1990 would have actually begun in October 1987 following the Wall Street crash.
For his part, Stovall said CFRA is fine with classifying the 1990 decline as a bear market. After all, he said, there’s no official body that designates what constitutes a pullback, correction or bear market (the rule of thumb is that a decline of 10% to 20% is a correction). And CFRA’s investment committee voted back in 1990 to include that decline among other bear markets since it fell 20% when rounded and surrendered more than 50% of what had been gained in the prior bull market, something that couldn’t be said of any other deep correction, Stovall said.
But others take exception to the idea the current bull began in March 2009. As MarketWatch noted back on the current bull’s ninth “birthday” in March, the notion of measuring a bull from the bear-market low is controversial in itself.
Read: Is this bull market really 9 years old?
Indeed, Hirsch’s objection is that the definitions of bull and bear markets are much more nuanced. Hirsch advocates using definitions laid out by Ned Davis Research. Under those criteria, a bull market requires a 30% rise in the Dow Jones Industrial Average DJIA, -1.11% after 50 calendar days, or a 13% rise after 155 calendar days. Reversals of 30% in the Value Line Geometric Index since 1965 also qualify.
“Using Ned Davis rules, the longest bull began on Oct. 11, 1990, and ran for 2,836 calendar days until July 17, 1998,” Hirsch wrote. And the current bull didn’t begin until Feb. 11, 2016, and would therefore have to run until Nov. 17, 2023, to beat it (see table below).
That could be solace for investors who find reason to worry about the age of the current bull market, despite the axiom that bull markets don’t die of old age. For others, the debate might resemble Wall Street’s equivalent of the theological debate over how many angels can dance on the head of a pin.
Stovall, in his note, said he respects the opinions of those who disagree with the notion that the current bull is set to become the longest on Aug. 22, but wondered if in the long run it’s of any importance.
Meanwhile, “the rest of the investing world will likely be talking about the longest bull market in the next week or so, not in 2021,” he wrote. “That’s because no financial print, radio or on-air personality in their right mind would suggest letting their competitors hype the new longest-bull story while they insist on covering the issue three years from now (provided they are still employed).”
