Best of the Week
Most Popular
1. Market Decline Will Lead To Pension Collapse, USD Devaluation, And NWO - Raymond_Matison
2.Uber’s Nightmare Has Just Started - Stephen_McBride
3.Stock Market Crash Black Swan Event Set Up Sept 12th? - Brad_Gudgeon
4.GDow Stock Market Trend Forecast Update - Nadeem_Walayat
5.Gold Significant Correction Has Started - Clive_Maund
6.British Pound GBP vs Brexit Chaos Timeline - Nadeem_Walayat
7.Cameco Crash, Uranium Sector Won’t Catch a break - Richard_Mills
8.Recession 2020 Forecast : The New Risks & New Profits Of A Grand Experiment - Dan_Amerman
9.Gold When Global Insanity Prevails - Michael Ballanger
10.UK General Election Forecast 2019 - Betting Market Odds - Nadeem_Walayat
Last 7 days
What happens To The Global Economy If Oil Collapses Below $40 – Part II - 15th Nov 19
America’s Exceptionalism’s Non-intervention Slide to Conquest, Empire - and Socialism - 15th Nov 19
Five Gold Charts to Contemplate as We Prepare for the New Year - 15th Nov 19
Best Gaming CPU Nov 2019 - Budget, Mid and High End PC System Processors - 15th Nov 19
Lend Money Without A Credit Check — Is That Possible? - 15th Nov 19
Gold and Silver Capitulation Time - 14th Nov 19
The Case for a Silver Price Rally - 14th Nov 19
What Happens To The Global Economy If the Oil Price Collapses Below $40 - 14th Nov 19
7 days of Free FX + Crypto Forecasts -- Join in - 14th Nov 19
How to Use Price Cycles and Profit as a Swing Trader – SPX, Bonds, Gold, Nat Gas - 13th Nov 19
Morrisons Throwing Thousands of Bonus More Points at Big Spend Shoppers - JACKPOT! - 13th Nov 19
What to Do NOW in Case of a Future Banking System Breakdown - 13th Nov 19
Why China is likely to remain the ‘world’s factory’ for some time to come - 13th Nov 19
Gold Price Breaks Down, Waving Good-bye to the 2019 Rally - 12th Nov 19
Fed Can't See the Bubbles Through the Lather - 12th Nov 19
Double 11 Record Sales Signal Strength of Chinese Consumption - 12th Nov 19
Welcome to the Zombie-land Of Oil, Gold and Stocks Investing – Part II - 12th Nov 19
Gold Retest Coming - 12th Nov 19
New Evidence Futures Markets Are Built for Manipulation - 12th Nov 19
Next 5 Year Future Proof Gaming PC Build Spec November 2019 - Ryzen 9 3900x, RTX 2080Ti... - 12th Nov 19
Gold and Silver - The Two Horsemen - 11th Nov 19
Towards a Diverging BRIC Future - 11th Nov 19
Welcome to the Zombie-land Of Stock Market Investing - 11th Nov 19
Illiquidity & Gold And Silver In The End Game - 11th Nov 19
Key Things You Need to Know When Starting a Business - 11th Nov 19
Stock Market Cycles Peaking - 11th Nov 19
Avoid Emotional Investing in Cryptocurrency - 11th Nov 19
Australian Lithium Mines NOT Viable at Current Prices - 10th Nov 19
The 10 Highest Paying Jobs In Oil & Gas - 10th Nov 19
World's Major Gold Miners Target Copper Porphyries - 10th Nov 19
AMAZON NOVEMBER 2019 BARGAIN PRICES - WD My Book 8TB External Drive for £126 - 10th Nov 19
Gold & Silver to Head Dramatically Higher, Mirroring Palladium - 9th Nov 19
How Do YOU Know the Direction of a Market's Larger Trend? - 9th Nov 19
BEST Amazon SMART Scale To Aid Weight Loss for Christmas 2019 - 9th Nov 19
Why Every Investor Should Invest in Water - 8th Nov 19
Wait… Was That a Bullish Silver Reversal? - 8th Nov 19
Gold, Silver and Copper The 3 Metallic Amigos and the Macro Message - 8th Nov 19
Is China locking up Indonesian Nickel? - 8th Nov 19

Market Oracle FREE Newsletter

How To Buy Gold For $3 An Ounce

Can the Stock Market Close Higher For a Record 10th Year in a Row?

Stock-Markets / Stock Markets 2018 Jul 11, 2018 - 10:51 AM GMT

By: Troy_Bombardia

Stock-Markets

The S&P 500 Total Return Index is slightly different than the S&P 500 Index in that it includes the dividend yield that companies throw off. Hence, the S&P 500’s Total Return Index tends to go up a little more than the S&P 500 each year.

As of the end of 2017, the S&P 500 Total Return Index has gone up 9 years in a row (2009 – 2017, inclusive). If the Total Return Index closes higher at the end of this year, it will set a new record for 10 years higher in a row.


Will this happen? Will the Total Return Index close higher 10 years in a row? Or will the streak break because the TIME cycle is “too stretched”? (The Total Return Index is up more than 4% year-to-date).

What the bears believe

The bears believe in TIME cycles. E.g. if a market goes up for “too long”, it must go down.

Since the  S&P has gone up 9 years in a row already, the bears believe that the stock market “must” go down this year.

Why the bears are wrong

For starters, this streak has already been broken.

If you just look at the S&P 500 Index (not the Total Return Index), the S&P was flat in 2011 and closed negative in 2015. The S&P 500 Index has not gone up 9 years in a row.

But here’s the more important point. Saying that the Total Return Index has “gone up 10 years in a row” is misleading because this statement only uses yearly closing prices (i.e. right before December 31 of each year). There’s nothing magical about December 31 – it’s just a trading day, and there are 252 of them every trading year.

The reason why the Total Return Index has not “closed negative” is because none of the “big corrections” in the current bull market (e.g. 2010, 2011, 2015-2016″) happened occurred near the end of the calendar year.

If instead of using January 1 – December 31 as your “year” you used any 12 month period as your “year”, you’ll see that the stock market has “gone down over the past year” in 2011, 2012, 2015, and 2016.

Bull markets and economic expansion don’t die of old age

Here’s the most important point that bears fail to realize. Bull markets and economic expansions don’t die of old age. Let’s look at the S&P 500’s annual returns chart again.

If you look at the data carefully, you’ll notice that bull markets are lasting LONGER AND LONGER in terms of TIME. Anyone who becomes bearish just because “the bull market is getting long in the tooth” would have missed out on big gains.

Do you see any pattern in how long it takes for the stock market to fall?

No? That’s because there is no pattern. There is no rule saying that “if the stock market goes up X years, it must go down the next year”.

The stock market does not follow a TIME-driven cycle like the 4 seasons. The stock market follows the U.S. economy. If the U.S. economy continues to improve, then the stock market will continue to trend higher, regardless of how “old” the bull market is.

Here’s another interesting point. Since the 1980s, economic expansions have lasted longer and become more steady. Economic recessions before the 1970s were much more common than economic recessions after the 1970s. Before the 1960s, 10%+ GDP growth was common, but so was negative GDP growth. After the 1970s, 10%+ GDP growth has not occurred, and negative GDP growth has become rare.

As you can see, fluctuations in GDP growth are shrinking. With economic expansions lasting longer and longer, bull markets in stocks have also naturally lasted longer and longer.

“Analysts” who predict recessions based on “this economic expansion is too long the tooth” have failed miserably. Recessions were much more common pre-1970s and post-1970s.

Conclusion

The economy will not enter into a recession in 2018, and the S&P 500 Total Return Index will probably close higher for the 10th year in a row.

Click here for more market studies.

By Troy Bombardia

BullMarkets.co

I’m Troy Bombardia, the author behind BullMarkets.co. I used to run a hedge fund, but closed it due to a major health scare. I am now enjoying life and simply investing/trading my own account. I focus on long term performance and ignore short term performance.

Copyright 2018 © Troy Bombardia - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules