Will the Record Breaking Bull Market Last?
There is always the fear of a crash when the bull market reaches record breaking figures. But those fears could be unfounded this time.
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To successfully carry out online stock trading, you need advanced trading software to give you a clear understanding of the state of the market. The most basic understanding is whether the market is in a bull or bear state. We did check out the factors characterizing a bull market earlier. We’re in a bull market now that has hit the record for the longest ever bull run. Now it’s worth checking out what an experienced analyst feels about all this. Is this the time to have a big grin on your face, if you’re an investor or stock trader? The Basics of a Bull Market Seasoned analyst Martin Tillier gets back to the basics. What should a “bull market” be all about? What defines it? Well, perception varies and matters a lot in the stock market. Perception fuels opinions and determines action. But the general definition is that a “bull market” is one having 20% gains at least, without any period where the market gets to lose 20% or more. So it’s a bull market we’re in alright, one that began on March 9, 2009 and broke the record on August 22, 2018. Controversy over the 20% Figure But Tillier wonders why the 20% figure has been chosen as an indication. However, it has long been an accepted figure in trading circles though there are analysts, investors and traders who don’t quite buy that. And there is also disagreement regarding the previous long bull run, called the dotcom boom. The general consensus is that it began with the market bouncing back in October, 1990 after the S&P 500 dropped 19.92%. The 19.92% figure is rounded to 20%. But there are those who believe the figure shouldn’t be rounded. If so, the bull run couldn’t be considered to have started then. But Tillier reminds that traders often work with rough estimates and don’t necessarily wait for the precise dot. If they did, they’d miss out on
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opportunities. So the argument about precision of the figures can be avoided for now though it can’t be totally discarded. Longevity Factor of the Current Bull Run Now let’s focus on the current bull run. The big question is, will it stay? Tillier reckons it will. The old adage says, “All good things must come to an end.” And that’s also the usual thought pattern among traders and investors. But Tillier considers this bull run to be different from the previous ones. That’s because this run was made sustainable by two consolidation periods, not corrections in the region of 20% but still significant consolidations, in 2016 and earlier during 2010-2011. The start of this bull run in 2009 was also an exaggerated low. And, looking at the strength of the US economy at present, Tillier reckons that stocks don’t appear to be overvalued even if record highs are being reached. The S&P 500 may be having a current average P/E ratio of 24.85 which is higher than the historical average. However, it is still way short of figures in the region of the 30s and 40s, which it reached during the dotcom boom. With the tax cuts and other corporate-friendly policies along with a continually growing rate of growth plus rising consumer confidence, the 24.85 P/E doesn’t appear to be too big a figure to face the risk of collapsing. So the bull market is here to stay.
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