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Is this Bull too Old?

bull (Demo)

The bull market reached a record in August becoming the longest running US bull market in history.  Stocks have risen more than 300% since early March 2009 without seeing a decline of 20%.  The stretch surpasses the previous longest ever bull market that ended in March 2000 with the technology bubble.

Does this mean the end of this fabulous run is near?  Unfortunately we, nor anyone else, knows the answer.  There could be a market crash this September, or the bull market could continue for years to come.  While currently the stock market still looks to be on solid footing, it can change quickly for any number of reasons.

The best way to prepare for the next decline is to diversify across asset classes.  Owning international stocks diversifies the risk from having exposure to just the US stock market.  While US stocks have outpaced international stocks over the last several years that will eventually change. For example, from January 2000 to December 2009 US stocks fell a cumulative 9%, whereas international stocks rose a cumulative 31%.

High quality fixed income offers an even better hedge against stocks as investors have shown time and again that they flock to safe haven investments during times of turmoil.  From the peak of the market in October 2007 until the bottom in early March 2009 during the Financial Crisis the US stock market fell 50% cumulatively.  Over that same time high quality bonds, as measured by the Barclays Aggregate Bond Index, were up cumulatively 7%. We believe they will hold up well again the next time we see the stock market dive.

However, if you’re feeling particularly nervous about the current market it might be a good time to reevaluate your current asset allocation.  We would be happy to discuss your current position and whether any changes might make sense.  It’s best to consider taking steps now, when the US stock market is near all-time highs rather than wait until we see a significant pullback.

While the current bull market is certainly long in the tooth, that doesn’t mean it’s destined to fall in the near term. However, it makes sense to protect against the next US stock market decline by keeping a portfolio diversified. By diversifying broadly you can limit the likelihood that any one portion of the global financial market can sink your portfolio and it puts you in a better position to meet your long term goals.


Index Performance    Aug.  YTD Trl 1 Yr
US Stock (Russell 3000)   3.51% 10.39% 20.25%
Foreign Stock (FTSE AW ex US) -2.04% -3.26%   3.80%
Total US Bond Mkt. (BarCap Aggregate)  0.64% -0.96%  -1.05%
Short US Gov. Bonds (BarCap Gov 1-5 Yr)  0.43%  0.07% -0.66%
Municipal Bonds (BarCap 1-10yr Muni)  0.09%   0.53%  -0.20%
Cash (ICE ML 3Month T-Bill)   0.18%    1.15%    1.52%