Recession Obsession: How Worrying Too Much Can Ruin a Record Bull Market
September 4, 2018
By Colin O'Shea • Securities Analyst
On Aug. 24 the S&P 500 closed at a new all-time high, officially marking the longest bull market on record. The current bull market began when the S&P 500 hit its low on March 9, 2009. It reached a milestone on Aug. 22, 2018, when it hit 3,453 days — surpassing the bull market of the 90s in terms of a time period. However, in order to make it official, the S&P 500 also needed to reach a new all-time high closing price (which it did last Friday).
How long will the Record bull market last?
The truth is, no one knows. There are many analysts, pundits, and prognosticators trying to predict the next recession. In hindsight, someone will be right — but that does not make him or her an oracle. Even a broken clock is right twice a day.
According to Peter Lynch, former mutual fund manager at Fidelity Investments, “Far more money has been lost by investors in preparing for corrections, or anticipating corrections, than has been lost in the corrections themselves.”
Even the best financial professionals cannot accurately predict the next downturn. The graph below shows numerous financial professionals incorrectly calling for the end to the current bull market over the past six years. As you can see, the market paid little attention:
More often than not, investors who try to time the market end up hurting their performance by buying and selling at the wrong time. According to the most recent investor behavior study by Dalbar, investors guessed right on the direction of the market about half of the time over the last 20 years. As a result, the following chart shows the average investor underperforms the stock and bond market.
Source: 2018 Quantitative Analysis of Investor Behavior Report by Dalbar
At Security National Bank, we do not try to time the markets. We design, build and manage portfolios to meet the long term goals of our clients. We remain fully invested throughout the market cycle and use diversification to control risk. Contact an advisor at Security National Bank to develop a long-term investment strategy and worry less about predicting the next recession.