Stock Market: Happy Ninth Anniversary Bull Market - More Will Come

(Drivebycuriosity) - Today the bull market for US stocks celebrates his 9th anniversary. Since March 9, 2009 the S&P 500, the gauge for the US market, has more than quadrupled (plus 305%  reuters). Stock prices have been accompanying the growing global economy and climbing company profits.

I think this bull market will see more anniversaries. Since 1928 (the long run) the US stock market (S&P 500) created an average return of about 10% p.a! (dividends reinvested nyu.edu/ investopedia). So, stock market gains are the rule and dropping stock prices (including corrections & crashes) are the exception.

I claim that we are in a secular bull market that could even dwarf the stock market rally from 1982 till 2000 when the Dow Jones jumped from just 800 points to around 10,000 points. My claim is mainly based on four arguments:

1. Company profits will continue their solid growth. During the recessions of the years 2001/02 and in 2008 companies restructured and reduced costs significantly in order to survive. Now they are much fitter and more efficient than before. I believe that this learning process will continue and will translate into a long term trend of rising company profits.

2. We are experiencing 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.

3. Lower taxes and less regulation in the US will also support the growth of the company earnings.

4. We are having solid tailwinds from the emerging markets which are even getting stronger. The catching-up process in China, India, Indonesia and a lot of other countries translates into high growth in large parts of the global economy that creates continuously rising revenues & profits for global companies like Starbucks, IBM, Caterpillar, Apple and other members of the S&P 500 (world).

I don´t fear that the climbing interest will crash the bull market. History shows that stock prices & interest rates can happily rise together: The Bank of America Merrill Lynch (finance) notices that “the 1950s was a period of higher stock prices and higher US interest rates. The US 10-year yield bottomed near 1.5% in late 1945 and the S&P 500 remained firmly within its secular bull market until yields moved to 5-6% in the mid 1960s. The S&P 500 rallied 460% over this period.”

I am aware that President Trump`s tariff hikes on steel & aluminum are creating some headwinds for the stock market. But I doubt that the situation will escalate into a full fledged trade war - which could cause a new recession - because all participants (USA, Europe, China) are aware of the risks.

Enjoy!