How to invest during a late bull market

Prudent to keep on top of rebalancing so portfolio doesn't overly favour stocks

Advertisement

Advertise with us

It’s been 3,466 days (as of today) and counting. That’s how long the current bull market has lasted. And it’s a record, for sure — for the S&P 500, that is.

Read this article for free:

or

Already have an account? Log in here »

To continue reading, please subscribe:

Monthly Digital Subscription

$1 per week for 24 weeks*

  • Enjoy unlimited reading on winnipegfreepress.com
  • Read the E-Edition, our digital replica newspaper
  • Access News Break, our award-winning app
  • Play interactive puzzles

*Billed as $4.00 plus GST every four weeks. After 24 weeks, price increases to the regular rate of $19.00 plus GST every four weeks. Offer available to new and qualified returning subscribers only. Cancel any time.

Monthly Digital Subscription

$4.75/week*

  • Enjoy unlimited reading on winnipegfreepress.com
  • Read the E-Edition, our digital replica newspaper
  • Access News Break, our award-winning app
  • Play interactive puzzles

*Billed as $19 plus GST every four weeks. Cancel any time.

To continue reading, please subscribe:

Add Free Press access to your Brandon Sun subscription for only an additional

$1 for the first 4 weeks*

  • Enjoy unlimited reading on winnipegfreepress.com
  • Read the E-Edition, our digital replica newspaper
  • Access News Break, our award-winning app
  • Play interactive puzzles
Start now

No thanks

*Your next subscription payment will increase by $1.00 and you will be charged $16.99 plus GST for four weeks. After four weeks, your payment will increase to $23.99 plus GST every four weeks.

Opinion

Hey there, time traveller!
This article was published 08/09/2018 (2592 days ago), so information in it may no longer be current.

It’s been 3,466 days (as of today) and counting. That’s how long the current bull market has lasted. And it’s a record, for sure — for the S&P 500, that is.

Among the United States’ broadest, largest and most diversified listing of stocks — 500 companies, featuring many of the largest companies in the world — it’s a barometer for the global economy. Since March 9, 2009, when markets bottomed out after the Great Recession, the S&P 500 has taken a rather up-and-down climb toward record highs to create a bull market that is longer than any other in its history.

While that sounds dandy, what does it mean for your investments?

Richard Drew / the associated press files
The previous longest bull run had a cumulative return of more than 400 per cent from 1990 to 2000.
Richard Drew / the associated press files The previous longest bull run had a cumulative return of more than 400 per cent from 1990 to 2000.

Well, for one, if you’ve been invested in U.S. stocks since then, you’ve likely been well rewarded.

The cumulative return on the S&P 500 has been more than 300 per cent. All the while, there have been drops in the market, but none exceeding 20 per cent — a number that officially puts an end to bull markets, transforming them into bear markets.

Still, although we can admire this bull for its stamina, it’s not the best ever in all ways.

“As much as this is a milestone in terms of time — day count — the current S&P 500 bull market isn’t the strongest in terms of return,” Brent Joyce, chief investment strategist at GLC Asset Management Group.

For example, the previous longest bull run — from 1990 to 2000 — had a cumulative return of more than 400 per cent.

“The one that is more fair, in my view, is the compound annual growth rate,” he said. “Currently, we’re running at 16.7 per cent (per year), and that only ranks eighth out of 12 bull markets since the Second World War.”

Nonetheless, this market has been impressive given its resilience in the face of adversity. It rose out of the ashes of a collapsed financial system, a meltdown also celebrating a milestone this month. On Sept. 15, it will have been 10 years since Lehman Brothers — one of the U.S.’s largest investment banks — went belly up, setting off a panic sell in stocks, among other assets.

It was pandemonium. Some believed capitalism was kaput. They were wrong (obviously) and the global economy slowly, but surely, recovered.

“Because of scars from 2008, there are so many worries that have kept this bull market from really being ebullient,” said Stephen Lingard, a co-lead portfolio manager with Franklin Templeton Investments.

Indeed, intrepid investors who have remained in the market since then have benefited, but it’s been a harrowing trip at times. But the many bumps have also been beneficial, he said.

“There have been lots of challenges along the way that have kept investor sentiment from really causing a melt-up in the market that would lead to a huge overvaluation situation, making the market vulnerable” to a bear market, Lingard said.

Underpinning each of these has been that the bull would croak.

That’s often the concern financial adviser Cory Papineau at Assiniboine Credit Union would hear from clients over the past decade.

“My members do express nervousness in growth of the markets,” the Winnipeg-based financial planner said.

For example, many fear what’s happening in the U.S. with trade and politics will now spell doom for markets.

“But I continue to stress that the markets are not driven by the news… and that fundamentals are what matter — even if the U.S. enters some turmoil.”

The “fundamentals,” like earnings growth, have been improving and appear to have more room to grow for the foreseeable future. This is a marked difference from the early stages of this bull market.

At first, stocks rose mostly from ultra-low interest rates pushing investors away from the safety of bonds — because their yields were low as a result — into risky assets like stocks, often to get the income from dividends. This elevated prices in front of actual profit growth. Had the market continued to grow unsupported by earnings, that would indeed be worrisome.

While we can’t expect the same expansion of earnings as the past two years, many in the industry forecast another 12 months of good growth.

Still, everyone should be mindful of what a 20 per cent or more drop in stocks means for them because while a bear market isn’t expected any time soon, its catalyst is often only clear in hindsight. That’s why the prudent investors should be taking some profits from the stock portion of the portfolio and putting that money into fixed income. In other words, they need to keep on top of rebalancing so their intended mix of stocks and bonds does not overly favour stocks.

Investors also must clearly understand that their investment strategy fits their “goals, time frame and capacity for risk.” People truly worried about losing 10 per cent or more of the value of their portfolio should reconsider investing in the stock market.

All of this seems straightforward enough: only take on as much risk as you need. But people tend to get greedy in late bull markets — and not realize it.

They are often reluctant to sell profitable investments, seeking just a little bit more. Then the bottom falls out, fear sets in and they panic sell.

Think of it this way — from one Winnipegger to another, Papineau said. Right now, stocks are fairly expensive (though some bargains may be found).

But when a bear market comes, stocks often go on sale, and you need cash on hand to bargain-hunt (something you won’t have if you’re too fully invested in stocks today).

“No one, especially Winnipeggers, likes to pay full price for anything,” Papineau said. “And when it comes to investing, it shouldn’t be any different.”

History

Updated on Saturday, September 8, 2018 7:37 AM CDT: Photo added

Report Error Submit a Tip

Business

LOAD MORE