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Happy Birthday Bulls!

This bull market has been raging for 8 years and it has been the least loved, the most questioned and the most doubted bull market we can remember. This bull market is the longest bull market in the US since the bull market run of 1987 to 2000. This lasted 12.3 years and returned 582.1%. Our current bull run has lasted 8 years and has returned 252.3% as per March 3rd. Can we make any generalization or comparison between different bull market? Probably not, although it is tempting. (We would have another four years and in excess of 200% to go).

This bull market has shown more resilience than its critics would admit: it has demonstrated

  • an ability to repeatedly climb a substantial wall of worry through its tenure;

  • a tendency to take advantage of portfolio rotation and rebalancing on a fairly regular basis commonly known as risk on risk off

  • a resilience and ability to rally following periods of significant spikes in market volatility (including among others: October 2014, August 2015, January 2016, and June 2016);

  • a capability to digest and diffuse commodity price volatility (including June 2014, January-February 2016) as well as defuse what we believe have been misplaced projections of deflation, reflation, and inflation (2013 and 2016); and

  • as well as shake off unexpected political and geopolitical events including Greece and other international debt problems circa 2010 and numerous years since, Fiscal Cliff risk in 2012, Government shutdown and default risk in 2013, China currency devaluations 2015 and 2016, UK Brexit vote 2016 as well other outcomes and trends including the recent rise globally in populism, nationalism and opposition to globalization.

The main elements that have supported the market remain in place:

  • The Federal Reserve given the most important support to the market since 2008. As the Fed moves further to normalize interest rates, fiscal stimulus is likely to carry the baton for growth since business and growth-friendly policies in Washington are gaining clarity.

  • Claims for Unemployment Benefits Hit a Nearly 44-Year Low in late February This shows that firms are refraining from laying off employees, a sign that the labor market has tightened.

  • The OPEC agreement and an earlier rise in energy prices spurred both an increase in US production as shown by the US Department of Energy’s production figures (the blue line above) as well as an increase in the number of rigs in operation in the US

The market is calling us to dance.

Sitting by the sidelines for the past 8 years has proven costly. If history is anything to go by, let us take solace in the graph on the right. Over the very long-term, the market is always up. There are periods of low returns and periods of negative returns, but over several business cycles patient investors come out ahead. This explains our long-term strategy of choosing solid companies to invest in and maintain the positions for a meaningful period of time.

Let us enjoy the good times.and keep the aspirin ready for the occasional headache.

Just remember: you are in the markets for the long-run.

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