How’s your 401K? Record bull market continues growth

Strong corporate profits and slowly rising employment help buoy market

Buoyed by strong corporate profits and slowly rising employment, the S&P 500 index has risen for more than nine years without a plunge of 20 percent or more — a record bull market.

On Friday, the index reached 3,455 days without tripping into bear market territory.

“The economy and the markets have had a good tail wind for an extended period of time,” said Bill Ragle, a finance professor at Cedarville University. “There is significance there.”

Strong markets are generally seen as good even for people who don’t consider themselves big investors — people with 401K retirement funds or market-sensitive pensions. The current bull market began in the wake of the Great Recession.

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When people talk about the record bull market, they’re talking about the Standard & Poor’s 500 stock index. On March 9, 2009, in the depths of the recession, the S&P 500 stood at 676 points. Since then, the S&P 500 has shot up by about 323 percent. It closed Friday at 2,875. 

“If you had to choose a market environment in which to experience an historical-length bull market, this is a very interesting environment in which to have this happen,” said Bill Wood, Wright State University senior lecturer in finance.

The Federal Reserve kept interest rates historically low for years after the recession and offered other supports. Investors didn’t flee the United States, as some once predicted.

And at some point, employers started hiring again.

“There are a lot of reasons to look at the economy and say, ‘There’s still some strength in this bull market,’” Wood said.

Ragle agreed.

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“I don’t see any major speed bumps,” he said.

However, both men warned against trying to “time” the market.

If you suddenly try to take advantage of market gains now, you’ve missed years of growth, Ragle said.

“If you get in now, you’re missing a lot of upside, as opposed to what you would have gotten if you had (invested) at the beginning of the bull market,” he said.

All good things come to an end: Bond yields could be one possible sign that the bull market is coming to an end. Rising bond yields mean declining bond prices.

As the Fed raises interest rates, bonds get cheaper — and that could lead to investors stepping away from stocks, Wood said.

“That’s probably the double-edged sword here,” he said. “We’re not there yet, but we can sort of see it on the horizon.”

Another possible troubling sign, according to at least one observer: Unexciting stalwart stocks such as utilities and consumer goods are starting to offer better returns than sexier stocks like tech companies.

“Defensive sectors have picked up the baton, and we think this could be a sign of trouble ahead,” Oliver Jones, a markets economist at London’s Capital Economics, wrote in a note to clients this week.

For now, though, the economy appears strong.

“We have an effective environment with the low tax rates and the lower regulatory burden that President Trump has brought in,” Ragle said. “We’re in pretty good shape, economically.”

He’s not happy with the ongoing trade war between the United States and China, however.

“Trade policies are just a disruptor right now, Ragle said. “He (Trump) should never have gone down that path.”


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