An Epic Bull Market – A wealth of common sense

The bull market of the 1980s and 1990s is the stuff dreams are made of.¹

The S&P 500 rose nearly 18% per year over those two decades.²

It is one of the great bull markets in history.

But if we want to be picky, the bull market didn’t really start until 1982. There were back-to-back recessions in 1980 and 1981-82. You had a 17% correction in 1980 along with an almost 30% bear market that bottomed out in 1982.

From the low in August 1982, which coincided with Paul Volcker declaring that inflation had finally been eliminated, through the end of 1999, the S&P 500 rose 20% per year.

Now here’s the crazy part – the current bull market isn’t that far behind that epic run!

See how the March 2009 market low compares to the rager of the 1980s and 1990s:

It’s a lot closer than you thought, right? I’ll admit, it’s closer than I expected.

Since the lows of the GFC, the S&P 500 is now up nearly 17% per year. So it’s not quite there, but an AI-induced bubble could certainly get us there.

That earlier bull market ended with a bang as the dot-com bubble took off in the late 1990s. From 1995 to 1999, the S&P 500 rose 37%, 23%, 33%, 28% and 21% in successive.

That helped it go from a bull market to ridiculous speed.

Could we see this again if AI is as great as all the tech luminaries claim? May be.

There are other similarities as well.

The crash of 1987 sent the stock market down 34% in one week. The Covid crash sent the market down 34% in a month.

And there was a soft landing in 1995 after the Fed initially raised interest rates quickly.

I’m not always one to repeat and rhyme when it comes to markets, but the scale and length of this bull market gets more and more impressive every year.

Of course, what followed after that market is also worth noting:

It was a lost decade between 2000 and 2009, ending with two of the biggest market crashes in history. Investors in the S&P 500 lost 10% overall in the first decade of the 21st century.

The US stock market has a history of extended bull markets followed by decades of losses.

The roaring 20s led to one of the biggest booms in history.

This was followed by a lost decade in the 1930s and beyond.

From the end of World War II to the mid-1960s, there was an extended bull market (with some hiccups along the way).

From the late 1960s to the early 1980s, the stock market went nowhere (after inflation).

Then came the bull run of the 80s and 90s, which was followed by a lost decade, which was followed by the current bull market.

Are we having another period where the stock market is going nowhere?

May be. It wouldn’t surprise me.

Just know that we are living through an epic bull market.

Enjoy it while you can.

Michael and I talked about new all-time highs, bull markets and more in this week’s Animal Spirits video:



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Further reading:
Could we see another lost decade in the US stock market?

Now here’s what I’ve been reading lately:

Books:

¹The best book ever written about this two-decade period is Bull: A History of Boom and Bust by Maggie Mahar. I highly recommend it to any other armchair market historians out there.

²The biggest difference between that bull market and this one is the yield of the bond market. Ten-year Treasuries grew by 9.6% per year from 1980-1999. Since bottoming out in 2009, Treasuries have risen 2.5% per year.