When we’re in the midst of a bull market, there tends to be less stress over stock prices. As opposed to times when the market goes down to lows and some people panic and sell in haste, bull markets tend to bring exuberance over stocks. Irrational exuberance, perhaps?
I’ve been noticing the market creep upward lately, and it’s been a steady climb. A little over a month ago I posted about stocks in February, and how it was worth thinking about how stocks had gone up lately. Additionally, when looking at historical stock returns by month, February wasn’t the best month.
Well, stocks didn’t follow that long-term trend. The S&P 500 went up 1.1% in February, continuing its trend of positive monthly gains. This was the 8 month out of the last 9 where stocks increased. The trend has thus far been continuing into March, with prices approaching record highs. The Dow has actually hit the record.
Anyway, back to the S&P. Take a look at the following graph of the S&P 500 over the last 10 years:
Look at where the market is now, on the far right. Consider how the market is reaching a second “peak” in the last decade. Things have been great with stocks over the last few years. However, do we think this will last forever? No, but do we think that prices will continue to steadily increase for an extended period of time?
Hard to say. I’m not a professional advisor, so I’m making a call. That being said, bull markets don’t last forever – just like market troughs don’t last forever either. Things seem to go in cycles, and there are many factors that come into play. Unemployment rates recently fell to a point where recent averages are at low point over the last 5 years. That might seem like a good sign that could boost investor confidence.
With such positive vibes all over, one should be happy. After all, most of us who have investments have seen them go up in value in recent years. After seeing declines back in 2008, this is really nice to see.
Is it good to think like a contrarian, and remember that things go in cycles? This cycle has been on the upswing for a quite a long time. It gets me wondering just how much this market has room to grow.
My Questions for You
What do you think of the shelf life of this bull market?
Do you often think that when things are going well for an extended period of time, it’s time to start wondering when the proverbial other shoe will drop?
Do you think about asset allocation, and possibly reducing exposure to stocks at times like this?