By now you have seen the media wish the bull market a happy 10th birthday (March 9th) although it came close to ending earlier since we had two 19% corrections along the way (2011, 2018).  Bulls remind us that bull markets don’t die from old age.  It’s recessions that typically do them in.  And there’s no recession in sight although many investors are on high alert.  “The next recession is the most anticipated of all time,” says noted economist Ed Yardeni, president of Yardeni Research.
Skeptics still claim this bull market was engineered by the Federal Reserve, fueled by QE (quantitative easing) among other factors.  But the outsized returns are real.  The S&P 500 total return (includes dividends) over this ten year period was 366.64%, or 16.65% annualized (source:   CNBC, Bloomberg).  Stocks outperformed fine art, fine wine, and even thoroughbreds.  They trounced the return on international stocks providing twice the annual gain (source:  Wall Street Journal).

  • Since we invest almost exclusively in large cap stocks, we are very interested in how they performed compared to (often riskier) small caps during the bull run.  The ten year chart below compares the Russell 1000 (large cap index) to the Russell 2000 (small cap index).  A rising line means large are outperforming small.  The chart shows that large caps and small caps take turns leading the market, but over this period performed in line with each other.  Many investors have the notion that large cap returns can’t keep up with small caps, but that simply isn’t true. 


  • Was last Friday’s employment report good news or bad news?  Only 20,000 jobs were added, a far cry from the 183,000 expected.  Is this a further sign of deceleration in the U.S. economy?  Maybe.  Embedded in the report was good news as well.  Wages for American workers rose nicely (fueling future consumption) and the unemployment rate dropped.  One other reason to stay optimistic:  nonfarm payroll growth has plunged to 20,000 or fewer jobs three other times since 2011, and each time the following month saw massive mean reversion, with average job gains in excess of 250,000 (source:  Drach Market Research).  In addition, the Fed is likely to stay on hold longer, maybe indefinitely (see below).
  • Fed Chairman Powell’s interview on 60 Minutes last Sunday was a non-event for the markets.  He stuck to the script which is a good thing for investors.  The Fed Chairman stated that U.S. economic growth will be slower this year than last, and reiterated the FOMC’s stance that it will be patient on interest rate policy.  The market is assuming a zero chance the Fed will hike rates between now and next January.  As for potential risks to the financial system, Mr. Powell mentioned cyber attacks as the number one threat.
  • 2020 is closer than you think.  The market will soon be paying a lot more attention to likely outcomes for the Oval Office and at the U.S. Capitol.  Current betting odds give Dems a 60% chance at winning the White House, while Republicans are at 62% to maintain the Senate and Democrats are at 70% to hold the House.

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