zealllc.com / Adam Hamilton / June 30, 2017
The US stock markets have enjoyed an extraordinary surge this year, shattering all kinds of records. It’s been fueled by hopes for big tax cuts soon from Trump’s Republican government. But such relentless rallying has catapulted complacency, euphoria, and valuations to dangerous bull-slaying extremes. This has left today’s beloved and lofty stock markets hyper-risky, with mounting potential for serious selloffs erupting.
History extensively proves that stock markets are forever cyclical, no trend lasts forever. Great bulls and bears alike eventually run their courses and give up their ghosts. Sooner or later every secular trend yields to extreme sentiment peaking, then the markets inevitably reverse. Popular greed late in bulls, and fear late in bears, ultimately hits unsustainable climaxes. All near-term buyers or sellers are sucked in, killing the trend.
This mighty stock bull born way back in March 2009 has proven exceptional in countless ways. As of mid-June, the flagship S&P 500 broad-market stock index (SPX) has powered 262.7% higher over 8.3 years! Investors take this for granted, but it’s far from normal. That makes this bull the fourth-largest and second-longest in US stock-market history! And the few superior bull specimens vividly highlight market cyclicality.
The SPX’s biggest and longest bull on record soared 417% higher between October 1990 and March 2000. After it peaked in epic bubble-grade euphoria, the SPX soon yielded to a brutal 49% bear market over the next 2.6 years. The SPX wouldn’t decisively power above those bull-peaking levels until 12.9 years later in early 2013, thanks to the Fed’s unprecedented QE3 campaign! The greatest bull didn’t end well at all.