Stock market bull run is dividing Wall Street

It’s
one of the most hated bull markets in stocks after
all.
Peter
Macdiarmid/Getty

• On Wednesday, the bull market in stocks became the
  longest on record by one measure. 
• However, strategists have identified at least four
  other reasons why any celebrations should be put on
  hold. 

The bull
market in stocks is now the
longest on record. The bull market in
stocks is not yet the longest on record. 

Both statements are accurate — it just depends on who on Wall
Street you’re asking.

While there’s agreement that
the S&P 500 clinched a new high on Tuesday, not everyone
concurs that the market achieved an even more impressive feat the
following day. From March 6, 2009 through the market close
on Wednesday, the index went 3,543 days without entering a
bear market, defined as a 20% drop from its recent highs. 

“There are conflicting views,” Kurt Spieler, the
chief investment officer of wealth management at First
National Bank of Omaha, said. He added: “Don’t let the age of
the bull market affect portfolio or investing decisions.”

Business Insider has counted at least five
different ways that investors and strategists are keeping tabs on
the length of this historic bull market.

Started from the bottom

Investors popping the champagne bottles this week are tallying
the days since the S&P 500 bottomed during the Great
Recession. 

Bank of America Merrill Lynch is on board with this measure. “Get
the bubbly out,” said Michael Hartnett, the bank’s chief
investment strategist, in a client note three weeks ahead of the
celebration. 

This measure also has the endorsement of S&P Dow Jones
Indices, which manages the benchmark indexes. 

Don’t count weekends and holidays

This is similar to the first measure, except that it excludes
days when the market was closed.

“If you go by trading days (my preferred way), it doesn’t
happen until the last day of August,” Ryan Detrick, a senior
market strategist, tweeted
on Wednesday.

He added: “It will be worth the wait.”

It’s not about the bottom

We may be getting the start date all wrong.

Michael Batnick, the director of research at Ritholtz Wealth
Management, argued in a
blog post that a bull market actually begins when the market
reclaims its old high, not when it bottoms. 

By this measure, the bull market
began in March 2013, when the S&P 500 finally closed
above its 2007 low — not in March 2009.

Wait until we close at a new high

“Until the S&P 500 closes at a new high, January 26th,
2018 represents the end point of the current bull market because
that’s the date of the S&P’s highest closing point of the
bull market,” Bespoke Investment Group said in a
recent
blog post.  

Based on this argument, the S&P 500 came within a hair of the
milestone on Tuesday when it
rose to an intraday high but failed to close at a
new high. If stocks proceed to plunge 20%, January 26 would mark
the start date of that bear market, Bespoke said.  

In fact, the market’s failure to nail a historic bull run by this
measure is an ominous sign because fewer stocks are participating
in the rally now compared to January, according to David
Rosenberg, the chief economist at Gluskin Sheff. 

“History may end up proving that just as investors
celebrated the longest bull market ever, defined as the length of
time without a 20% drawdown, the very same day we saw a classic
double-top that defined the end of the bull market,” he said in a
note on Wednesday.

It’s felt like we had a few bear markets

“Whichever camp you fall in, the salient point is that I
believe we experienced two resets along the way, invalidating the
notion that this is about to become the longest bull market in
history,” Batnick wrote. 

In other words, if a 20% drop is a bear market, then we’ve
kind of had a few.

“Remember, a 20% correction based on closing prices is the
commonly accepted threshold to mark the end of a bull
market,”  LPL Financial’s Detrick said in a note on
Wednesday. “Well, the S&P 500 Index corrected more than
20% 

intraday

 back
in 2011, and in February 2016 the median S&P 500 stock was
down 25% (as the S&P 500 slid 14.2%). 

There are a few more examples.

“The only way this is the longest bull market on record is
if you 1) call the 19% decline in 1990 a bear market, 2) don’t
call the 19% decline in 1998 a bear market, and 3) don’t call the
19% decline in 2011 a bear market,” Bespoke tweeted.

“Nonsensical.”

Batnick further noted that the Russell 2000 fell 26% during the
2016 sell-off. Even though the S&P 500 and the 30-member Dow
Jones industrial average receive the most attention, the Russell
2000 covers a wider swath of small-cap companies. 

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