One thing we look at is Conference Board’s leading economic indicators. What this consists of are 10 economic factors. These factors include claims for jobs benefits, factory orders and even S&P 500 performance. Right now, we are seeing strength among almost all ten economic factors. We have the election coming up and will see what happens but, right now, we are seeing a lot of strengths across the board. It’s unlikely we will see an economic downturn in the next 6-12 months.
History of The Market
A lot of the concerns are based off the assumption that market expansion started in 2009. When you say it feels like the market hasn’t had a correction since 2009, it feels like a very long time. However, there is more that goes into that. The current bull market has lasted 3,245 days and is the second longest on record. The longest was 4,494 days and that was from late 1987 to early 2000s. In that time period that bull market didn’t experience a single decline of 20%. One could say we still have over 1,000 days to catch up to the longest bull market. If you look at the numbers we’re really at the beginning of the 2016 and 2017 expansion.
The Market Now
From an economic market standpoint January 2016 was the worst January in history. The market fell north of 15% which isn’t technically a correction, but close to it. There were five straight quarters of the S&P 500 earnings dropping. We had negative manufacturing growth and a huge collapse in the oil industry. While this wasn’t a market correction, it looked very much like an economic downturn. If you look at the numbers we are just at the beginning of a new possible bull run. It comes down to earnings and growth in the second quarter. It’s looking to be 24.6% which is not what you usually see at the end of a run, rather it’s a number you would see at the beginning of a run. Companies are beginning to grow and energy is coming back up with a 123% earnings growth. All of that information points to the beginning of a new cycle.
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The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
Economic forecasts set forth in this presentation may not develop as predicted.
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