Stock Market: Are We Still In A Bull Market?

(Drivebycuriosity) - It seems there is some confusion. Some commentators claim that the market for stocks entered a new bear market - and dismiss the recent gains as a bear market rally -, others assert that the bull market, that started in spring 2009, is still going on (cnbc  marketwatch). What is behind it?

A bull market starts when stocks climb 20% or more from a recent low and a bear market begins when stocks drop 20% or more from the peak. During the turbulence of the last December week 2018 the S&P 500, the gauge for US stock market, dropped temporarily to 2,346 points, which is 20.2% below the all-time high of 2,940 point from last September. But if we believe Bloomberg the S&P 500 did not enter bear market territory in December (bloomberg   ). Apparently they calculate with Wall Street closing prices (at 4pm) instead of the fickle intra-day prices and sharp late afternoon rallies saved the bull (screenshots below). According to Bloomberg this happened twice in the past, once in 1998, and again in 2011.

And the stock market quickly reversed its course. Since the December lows the S&P 500 already regained about 14% and closed this Friday at 2,664 points, a minus of just 7% in the recent 12 months. The situation is not comparable with the bear markets from 1968-1970, 1973-1974, 2000-2002 & 2007-2009. They all lead to stock market declines of 33%+ and lasted each >1 year. Apparently in December we experienced just another correction which is part of every long lasting bull market, amplified by a temporary panic attack (driveby).

 (finance.yahoo   macrotrends )


Some groups have an economic interest to use the term bear market. Many hedge funds and other speculators are betting on falling stock prices. They borrow stocks and sell them immediately in the hope to repurchase them later for a lower price (short selling) or they buy options which benefit from dropping stocks prices (puts).  They are losing money in a bull market and need a bear market to survive. They are dismissing the recent gains as "bear market rally" in order to spoil the sentiment and to convince others that stocks have to fall again and to discourage potential stock buyers.

I assume  that the current stock market rally will continue and confirm the bull market again. The recession, which is already priced into the stock prices, at least partly, won`t happen. The US economy is still solid, jobless rates & weekly jobless claims are at all-time lows and company earnings are growing about 15% annually. Companies are still benefiting from a new industrial revolution: Advances in Internet, mobile computing, 3-d-printing, robotics, nano- & biotechnology and other technologies are reducing costs, raising efficiency and creating new markets. And oil got much cheaper in the recent months - minus 30% since October - and created a new tailwind for the global economy. I assume that the global economy will re-accelerate this year, thanks to cheaper oil and the still reduced US taxes. The bear market callers will get wronged again.