Show notes
Hey everyone. This is Kirk here again from Option Alpha. Welcome back to the daily call. Today, we're going to be talking about why this market that we are in right now just became one of the top six longest bull markets for stocks. I want to spend a little bit of time going through some of the data on the top six longest running bull markets in really, kind of our modern era or modern history. Basically, going back to 1950 is where we pulled all this data from. And so, we took a look at all these bull market runs and kind of analyzed them. And so, we put together the top six or so with these bull markets and the one we are in this month just crossed through and has become the longest-running market ever that we've ever had, the longest bullish expansion that we've ever had. Now, of course, this can always continue on further, but you just have to ask yourself what's the risk reward features of the market that we're in and where does that change your dynamic if you're a long-term equity investor.
There's six of these kind of eras really. There's the postwar boom back after the World War II ended, there is the 70s, the Reagan era and the 80s, the 90s leading up to the dot com, there's the housing bubble crash and kind of the expansion that was again, the housing bubble back in 2004, 2005, 2006, etcetera and then this one which is just kind of post great recession expansion. I don't even know what we're going to call it. Whenever it crashes, we'll usually get some sort of name. The first one which we'll go backwards in time here and kind of look backwards-forwards… But the first one is the postwar. This began really after World War II and lasted 86 months, so it was actually quite a long period of time that lasted all the way up until August of 1956, so quite a long time. It lasted a couple of years, seven plus years that era lasted and of course, the market went up during that time period 267%. Now, in the 70s, we had an expansion period from about October of 1974 all the way up until November of 1980 and that lasted 74 months. The market was up during that time period 126%. During the Reagan era, kind of that great expansion of the Reagan era that everyone talks about, the market had a bullish run of 60 months from August, 1982 all the way up till August, 1987. The market was up 229% during that time period. And then the time between basically the market crash that we had in the 2000 dot com bubble era, the market was up about 101% or so during about a 60 month time period. Just about five months, the market ran and again, that was the lows around 2002 in August till the market topped out in October of 2007.
Now, the one I left out here and I want to compare to the current run is the one that looks most similar to what we're dealing with right now and that is the great expansion that we had during the 1990s leading into basically the dot com bubble. Now, during that time period, the market went on one of its longest streaks which was 114 months, so basically 9 1/2 years of continuous movement up in the market which was pretty much an incredible feat for sure. And when you overlay both of these graphs together, both the great expansion and the one that we're in right now, kind of this post great recession market run, they look very similar. I mean, it's almost scary similar how they look. But the one in the 1990s that ended with the dot com bubble, the market ended up 118% mostly because of dot com, obviously, mostly because of all the hype around tech and it kind of crashed pretty hard, but it lasted 114 months. Well, this month, we just crossed over about 114 months on the current expansion and the market's up over 305%, 306% depending on how you calculate it with the S&P. The market's been up considerably and has now lasted longer than the one that we had back in 2000 when it ended in the crash in around 2000. We're in right now, one of the longest stretches of history of expansion and obviously, it's fueled by central banks and low interest rates, etcetera, all this post great recession expansion that we have had. Whether it's on paper or whether it's actually true, who knows? Well, time will tell and see where things go. But I think it's important to keep these in the back of your mind especially as we continue to move forward in the next couple of years.
Many people in this market right now have not traded through a recession or a drawdown, a significant drawdown in the market and that to me is a little frightening. I think people are going to be shocked to see how fast and how violently things can move down. But we've seen just in the last let's call it last year for the S&P 500, is a lot of volatility, but it's really a blip compared to what could happen if the markets really go crazy. Take this time to kind of do a gut check and just ask yourself. Do we really think that this is going to continue for another nine years? Probably not. Maybe another year or two or three? I don't know when it's going to end. I mean, it definitely could continue to move much, much further than where it is right now. I have no crystal ball, but the risk reward at these levels continues to be insane especially if you're an equity trader, so you should be an options trader and it gives you the flexibility and the advantage of being dynamic enough to change with the market. We're only trading 40, 60 days out, so we have the ability to adjust and hedge and move our position around wherever stocks go. Hopefully this was helpful. As always, if you guys have any questions, let me know and until next time, happy trading.
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