Dear Reader,
A lot of people got anxious this month.
There’s been some churn, as the S&P sorts the winners from the losers.
We talked about some of the neoclouds.
But even after this sell-off, the S&P 500 is up 12% year to date.
And something happened this month that most people missed.
The Birthday
The bull market turned four years old.
Its birthday was October 12th.
It began at a closing low of 3,577 for the S&P on October 12th, 2022.
On October 6th of this year, it closed at a record 7,818.
That’s a cumulative gain of 119% in nearly four years.
A lot of very average stock pickers look like geniuses right now.
I like to judge us by how we do when times are bad, like the years when inflation spiked.
But this bull market is unusual.
It’s the only one since World War II that has posted double-digit gains in each of its first four years.
How Long Do Bull Markets Last?
There have been 13 bull markets since World War II.
They last an average of four and a half years.
A bull market is officially over when the market falls 20% or more from its high.
A 10% drop is a correction, and it doesn’t end the bull.
So at four years old, you might get a little nervous.
History offers some encouragement.
The longest bull market on record was also a tech boom.
From 1987 to 2000, it ran twelve years and rose 582%.
The post-financial crisis run from 2009 to 2020 lasted eleven years and rose 400%.
The post-World War II expansion, 1949 to 1956, lasted 7.1 years and rose 266%.
Reaganomics, 1982 to 1987, lasted five years and rose 228%.
The 1970s recovery lasted 6.2 years.
The post-dot-com recovery lasted five years.
Now look at the other end of the list.
The late 1960s run lasted 2.1 years.
The COVID recovery lasted 1.8 years, though it rose 114% in that time.
Only one of the bull markets that reached four years failed to reach its fifth anniversary.
One.
And for the long-lived bulls, the average gain in the fifth year since World War II has been nearly 21%.
We’ll see if we can repeat that over the next twelve months.
The Four-Year Pattern
I’ve noticed something studying the history of warfare, too.
Things tend to end around four years.
Look at a lot of the great wars in history.
Four years seems to be about how long a group of humans can focus on the same thing at once.
That doesn’t mean this bull market is done.
It means the story has to keep evolving.
What Has to Happen Next
It can’t just keep being Nvidia and Micron.
It can’t be only semiconductor stocks.
CPUs, TPUs, GPUs.
That phase of the bull market is one we’re all sick and bored of.
For this bull to find its next legs, two things have to happen.
The first is what we discussed the other day, the AI trade moving from enablers to adopters, where you’ll see big profit expansion across the companies using the technology.
The second is robotics.
Both of those are happening right now, in real time.
My suspicion, and history, common sense, and my own experience all point the same way, is that this is the next phase of the AI story.
There are three stocks in particular I’ve been watching -
That I think are best positioned to make huge moves from this new shift to robotics.
And happy birthday to the bull market.
We’re now officially in year five.
Have a wonderful day.
I’ll see you tomorrow.
“The Buck Stops Here,”
Found this helpful? Share it with others.
Written by Dylan Jovine