Is This What A Secular Bull Market Feels Like?

 Fall is a wonderful time in Michigan.  The leaves are turning, the Tigers gave us some playoff excitement and football season is in full swing.  Economists and money managers must agree as many have been visiting the state giving us the opportunity to sit down with various experts over the past couple of weeks here at the Center.  One theme kept coming up while I was listening to a couple of these individuals and it was a welcome distraction from the typical debt ceiling/government shutdown conversations…the secular bull market.

The chart below shows the long-term secular trends for the Dow Jones over the past 100 or so years.  You can see that the markets go through long periods of stagnation, in essence going nowhere fast; followed by periods of steady increases.  These periods of stedily rising markets (indicated below in green) are referred to as secular bull markets.  You can see that this year the Dow has finally broken out of the sideways trading range of the past 12 years. 

The U.S. equity markets have been in a positive trend for four years now, yet one expert stated this is the least trusted, least believed bull market he has ever witnessed.  Most investors erroneously believe that the environment has to feel good before it is the right time to invest.   Unfortunately, once it feels good to invest it is usually the wrong time, think buying technology stocks in 1999.

Whether or not we are in a secular bull market remains to be seen, but once we can say for certain that we are it is usually too late.  Having a financial plan and staying disciplined with your investments, I think, is the most important key to successfully meeting your goals.  

Angela Palacios, CFP®is the Portfolio Manager at Center for Financial Planning, Inc. Angela specializes in Investment and Macro economic research. She is a frequent contributor to Money Centered as well asinvestment updates at The Center.

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The information contained in this report does not purport to be a complete dexcription of the securities, markets, or developments referred to in this material.  Any opinions are those of Center for Financial Planning, Inc., and not necessarily those of RJFS or Raymond James.  Expressions of opinion are as of this date and are subject to change without notice.  Past performance may not be indicative of future results.  Holding stocks for the long-term does not insure a profitable outcome.  Investing in stocks always involves risk, including the possibility of losing one’s entire investment.

The 3 Missing Bull Market Killers

 Every day I get questions from clients regarding the market being high.  Yes, the market’s nominal price is at an all-time high.  But consider the following situation: Over 20 years, with an average annual gain of 9% per year, the equity market could be looking at a DOW JONES average in the 80,000 range.  Twenty years ago the Dow Jones was hovering around 3,500 and since then we have had a 12 year period when the Dow did not make a new high, but still averaged almost 9% a year.   

The three things that tend to kill a bull market are inflation, interest rates, and valuations, and none of them are present yet.

A Look at Inflation

Notice that we are tracking at one of the lowest rates in history. You’ll see the Consumer price Index is well below the 10-year average. Just compare the difference between the price level of consumer goods and services in 2013 and in early 1980’s:

Sources: Bloomberg and Legg Mason. Past performance is no guarantee of future results. Please note that an investor cannot invest directly in an index, and index performance does not include transaction costs or other fees, which will affect actual investment performance.  Individual investor’s results will vary. The graph above is for illustrative purposes only and is not reflective an actual investment.

I don’t think I would be the first to remind you that interest rates are still at the lowest levels in history. This chart tracks interest rates and inflation as both trended down in recent years.

Interest Rates and Inflation

And when looking at the final potential bull killer, equity valuations, you’ll see the measures are in line with historical averages.  Not expensive and not cheap.

Equity Valuations

History as our guide would tell us that until all three or at least one of the bull market killers are present this bull is still alive and well.

Matthew E. Chope, CFP ® is a Partner and Financial Planner at Center for Financial Planning, Inc. Matt has been quoted in various investment professional newspapers and magazines. He is active in the community and his profession and helps local corporations and nonprofits in the areas of strategic planning and money and business management decisions. In 2012 and 2013, Matt was named to the Five Star Wealth Managers list in Detroit Hour magazine.

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Five Star Award is based on advisor being credentialed as an investment advisory representative (IAR), a FINRA registered representative, a CPA or a licensed attorney, including education and professional designations, actively employed in the industry for five years, favorable regulatory and complaint history review, fulfillment of firm review based on internal firm standards, accepting new clients, one- and five-year client retention rates, non-institutional discretionary and/or non-discretionary client assets administered, number of client households served.

The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete.  Any opinions are those of Center for Financial Planning, Inc., and not necessarily those of RJFS or Raymond James.  The Dow Jones Industrial Average (DJIA) is an index representing 30 stocks of companies maintained and reviewed by the editors of the Wall Street Journal.