The stock market bottomed out on 12 October 2022, and the weekend gone marked the two-year anniversary of this bull market - yes, it's a bull market. During 2022, we saw a vicious -25% drop in the S&P 500 in a matter of 9 months - ouch. And since then, readers will know that I have been bullish and have been on record about it. See here, here, here, here, here, and here.
If you listened to the permabears and the doomsayers leading into 2023, you've just given up about 63% in capital growth (excluding dividends) over the last two years. In other words, you're $100,000 investment is now worth about $163,000 (plus dividends). Remember you were comfortable with your 5% cash deposit? Risk does not equal comfort, this is the return for the risk one takes. Nothing is for free.
So, where to from here? Let's open up the history books, summarised in the table below. The table below summarises bull markets from 1950 to current, their magnitude of change in percent, and duration in years. The average bull market runs for at least 5 years and has gained more than 180%.
Bull markets that make it to one year, make it to year two, except for the post pandemic bull which didn't quite make two years - however it did see a rise of 114%!
History tells us that we should make it to year three, however we should temper our expectations. Detrick found that out of 16 previous bull markets (after bear or near bear markets), 12 of them made it to their third birthday, with an average gain of about 8% and a median return of nearly 10% in year three, pretty much what your average year does.
I'm not saying it's going to be smooth sailing. We're bound to have some rough seas ahead. For example, October is not a good month, seasonally, in election years. Yet it's part of the journey and the price we pay for long-term returns.
Listen, I know the bears sound smart and the bulls sound naive, however, what someone says and what someone does are two very different things. Nassim Taleb famously wrote in his book, Skin In The Game: Hidden Asymmetries in Daily Life, "Don't tell me what you think, just tell me what's in your portfolio".
Keep things simple, and take the long-view.
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