A new CNN Money report celebrated the fact that the current bull market has reached its 2nd birthday. However, in the same report, experts cautioned investors that this time frame typically signals a downturn in the market.
Stocks Have Been On a 2-Year Rally
Since March 6, 2009, the S&P 500 doubled in value from its bear market low of 666.79. The market has been moving in such a good direction, in fact, that some experts recommended incorporating riskier investments into their portfolios, or moving from bonds and into stocks.
While all ten sectors in the index have been rallying since the 2009, banks and retail stocks have been largely responsible for the bull market trend that has left many investors feeling very optimistic.
However, experts are warning investors that sooner than later, certain sectors will begin to slow while others continue to grow. In other words, some stocks may not be so reliable in the coming months.
The Party Won’t Go On Much Longer
Celebrating the bull market’s 2nd birthday sounds like quite an accomplishment–and it is considering the devastating drop in stocks following the financial crisis. But one expert says the two-year mark could actually be a cause for concern.
James Stack, a market historian and president of InvestTech Research, told CNN Money that the average period between the start of a bull market and the start of the bear market that follows is less than four years. If this average holds true, we have already reached the halfway point to the next bear market.
Stack noted that understanding how different sectors perform during different periods is extremely important now since, for many, the bull market party will soon be over. This is especially true for investments associated with financial firms and consumer discretionary companies like AIG that, based on historical standards, lose some of their luster during this time.
Gaining a significant amount of education into how the markets work could benefit you greatly as the trend continues. This way, your chance of having investments go wrong when the market shifts from bull to bear could be slim to none.
