Happy Birthday, Bull Market! (A Reflection on the Longest Upward Market Run in History)
March 11, 2019
By Michael List, CFP®
I read the beloved children’s book “Happy Birthday Moon” to my kids this weekend. In the book, Bear climbs up a mountain to talk to the Moon, only to realize that today is the Moon’s birthday just like Bear’s. On Saturday, the bull market also celebrated its birthday (and so we gave it two days off). Reflecting on this milestone unveils a couple profound facts.
A look back at the last 10 years:
The S&P 500 market closed at 676.53 on March 9, 2009. Last week it finished at 2,743.07. That is a 300 percent increase over the last decade. Incredible. Yet, as you can see from the chart below the S&P 500 did even better than that, when you account for the dividends these companies pay. The chart shows the difference between the S&P 500’s total return (blue) and price return (green). The total return for the market was almost 400 percent. This is astonishing, considering that the average dividend yield was barely above 2 percent during this time.
During week of March 9, 2009, my colleague Tom Limoges was walking through Barnes & Noble (for those of you who are unfamiliar with Barnes and Noble, it is a brick-and-mortar store where you can buy physical books made with paper pages). While Tom was there, he sent me a photo with the message, “another sign of the bottom? ... At the local Barnes & Noble … first table as you walk in.”
Apologies for the image quality (it was probably a first generation iPhone):
Photo Source: Tom Limoges
At the time, news headlines were about as dismal as you could imagine. One week earlier the Bureau of Labor Statistics had reported the economy lost 750,000 jobs the prior month and the unemployment rate was 8.3 percent, on the way to 10 percent.
Tom, however, had noticed a contrary indicator: the market sentiment had become so negative that it permeated everything.
A few months prior Warren Buffett said in an interview, “if you wait for the robins, spring will be over.” Buffett said he was buying stocks and encouraging others to do the same. A mere three months after the bottom, stocks had rallied 40 percent (unemployment didn’t peak for another four months). It is hard to time the market correctly, unless you have the benefit of hindsight. Tom was a few days late, Buffett was five months early and the unemployment numbers were eight months late. However, as you can see from Tom’s article from last week, if you miss the best days in the market your average return tumbles.
What can we learn from the Bull Market?
So, much like Bear, the journey for those invested in the market has led to the top of the mountain on the chart above. It has also led through some deep valleys and troubling waters. Nevertheless, if you persevere in the journey, remember that the path includes dividends to sustain you through dips in the road. If you are wondering, Tom has not yet sent me a message claiming that we are at the top of the market.
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