Mark the date of April 27 in your diary.
And if you have any kind of stake in the markets, perhaps pop some champagne in the fridge. What will you be celebrating? Well, on that date next year, we will officially have moved into the second-longest bull market in history.
According to calculations by Bank of America Merrill Lynch using the S&P 500, just under four months from now, the bull run that started in the spring of 2009 will become one of the great all-time upswings in equity prices.
On that day, on the rather large assumption there is not a catastrophic crash, it will overtake the 1949-1956 bull run measured by the number of days it has lasted. And it will rank second only to the 1990-2000 bull market among the all-time greats.
Photo: Reuters
The past 12 months have been disappointing for the markets. If you invested in the FTSE, you lost a bit of money but not much. Around most of the developed world, though not the emerging markets, you would have eked out some modest gains, yet nothing spectacular. That tepid performance, however, masks the fact that 2009-2015 taken as a whole is a very strong bull market by historical standards.
Of course, the markets may not make it through to that April 27 date without a collapse.
The Fed has started raising rates. Commodity prices are crashing. The threat of terror attacks remains higher than ever. One crisis or another could easily trigger a global meltdown.
But the fascinating question is: can we make it through the summer – and even further to become the longest bull run ever? To do that, it would have to carry on until 2019? Is that possible?
As the bull market gradually strengthens, in length if not in strength, there are three reasons for thinking it might just happen.
First, it does not really feel like a bull market yet. Indeed, I suspect most people will be surprised to learn that we are already close to the second longest of all time, given that equity prices are only just getting back to the levels they were at 15 years ago.
The real top of any bull market is usually manic, with valuations going crazy, and small investors piling into the market in the belief that it is an easy way to make lots of money.
True, there are some signs of that, especially among the tech companies. There are now 145 “unicorns” – that is, start-ups worth more than $1bn (£671m) – and between them they are worth more than $500bn.
Netflix is worth more than the whole of the Polish market, which suggests one must be wildly overvalued and the other undervalued.
Photo: Getty Images
Google and Amazon combined are worth more than the whole of the MSCI China index. That is getting very frothy, although given the rate of innovation at both companies it may not be as unreasonable as it sounds.
Even so, across the markets as whole, there is very little evidence of the irrational exuberance, to borrow a phrase from the 1990s from Alan Greenspan – chairman of the US Federal Reserve from 1987 to 2006 – about trading right now.
Next, there may still be more stimuli to come. Central banks have printed truckloads of money in the past seven years, and the one thing everyone is agreed on is that a lot of it has flooded into equities.
But who says they have finished yet? All it will take is a minor recession – and it would hardly be surprising if we saw one of those – and the presses will start rolling again. Indeed, the ECB is already expanding its programme of quantitative easing.
It doesn’t stop there. Negative interest rates are starting to become normal. Sweden and Switzerland already have them, and others may well follow. If they become widespread, that will be a huge boost for equities.
After all, a 3pc dividend yield on the FTSE will look pretty good compared with minus 0.5pc in the bank.
Central banks may start to buy equities directly. The Bank of Japan has already started doing that, and since we followed its lead on QE, there is no reason we should not follow them into buying equities directly as well. If so, the market would rise strongly.
Finally, the economy may actually start to genuinely strengthen. By any historical standards, the recovery from the crash of 2008 and 2009 has been very weak. There may be plenty of reasons for that, from excessive levels of debt to stagnating productivity growth, to the rate of technological innovation slowing down.
As some experts forecast, we could have fallen into an era of secular stagnation in which growth is permanently lower than over the past half century. Then again, it could just be an aberration.
There are some signs of acceleration. A fascinating study in the Harvard Business Review showed that start-ups founded between 2012 and 2015 were growing at twice the rate of those started a decade earlier. New technologies, such as robotics and space, are developing fast.
If growth – and wage growth in particular – started to shift back towards its long-term averages, company sales and profits would rise very quickly. And the markets would rise with them.
On a more whimsical note, it is worth remembering that, measured in real terms, the markets have always ended up under Tory governments, with the sole exception of Ted Heath’s ill-fated administration of 1970-74.
That would suggest the FTSE at least should make it through to 2020, and perhaps even beyond given the state of the opposition, in positive territory.
Of course, share prices will crash again one day. They always do. Every bull market has ended in a bubble, and crashed spectacularly. There is no reason to think this one will not meet that fate as well sooner or later. But the timing of that is what counts.
In reality, the 2009-2015 upswing is already joining the ranks of epic bull runs. It is under-appreciated – and it could yet turn into the longest of all time.
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