You don't get to be the longest bull market ever, 3,453 days, without doing a lot of things right. That's why we need to celebrate this milestone and, more importantly, learn from it on still one more day where the bull defied the odds and hit a new record high.
The main thing you have to realize when you analyze a bull market is that it climbs a wall of worry, a wall so high, with so much barbed wire and cut glass at the top, that it's almost too daunting to believe.
So without further ado, lets analyze the top walls this market has overcome and how it was able to do so.
First, it's the skepticism. From the very beginning of this bull market, when the S&P 500 was at 666, it just hit 2,872, there was - and still is - rampant disbelief in stocks. It never ends. I googled a bunch of stories about the length of this bull market and not one was remotely celebratory. Just the opposite. Most explained how the bulls was on its last legs. And isn't that the point? It's been on its last legs from the days it started. There's been rampant suspicion of anything and anyone bullish. As someone who has been bullish, I can tell you that I am more ridiculed than most even though I've been right. Being right means nothing if you are bullish. It's the skepticism, I think that's been integral to the length of the bull. This thing would have ended if investors had ever gotten euphoric. However, I think that the Great Recession, the founder of the bull market, is responsible for a lot of the cynical skepticism that confounds us. If we were to lose that attitude than the bull would be in jeopardy. But all I read and heard today was "is this setting up for a record fall?" Music to my ears. Let's go a step further. The people who have railed most against this market are hedge fund managers, including some of the biggest names, who have just been dead wrong and many remain dead wrong. They never admit it, though, and they always get away with it.
Number two, we have heard endlessly that valuations are too high, that stocks are just plain too expensive. By any yardstick, at any given time, you could argue that some of the market got too high. But then that part corrects and we start over. Are stocks expensive? Last year at this time they sure seemed to be. Then, though, we got tax reform and it has created an earnings bonanza that makes it clear that stocks weren't expensive. And they have been bountiful versus the paltry return you get from bonds.
There are, at any given time, some visibly expensive stocks of which Netflix (NFLX) and Amazon (AMZN) are the two most obvious. Let's puzzle over that for a second, though. The skeptics have laid bet after bet against these companies and have always come up snake eyes because they deliver far better growth than anyone thought, and this market has always and will always have a bias toward growth.
3. We have had non-stop political turmoil: vicious, often pointless, gridlock, the rise of the Tea Party, the notion that President Obama would not do anything to help the rich people who own stocks and that neither Hillary Clinton nor President Trump would be good for the stock market. The market overcame all of these and, until President Trump unveiled his tariff plan, the bulls have had free reign. Now even these issues seem to be deal-able given that we took out the S&P high today.
4. Don't fight the Fed. The Fed has been raising rates for three years now, taking them from .25 to 2%. We have been schooled that you should not trust a market when the Fed is hiking. But you would have missed fortunes if you believed in don't fight the tape, I think because rates have been so low to begin with. But even here at 2% it has not meant a lot of pernicious competition to stocks even as we heard endlessly they should be. Atlas Shrugged.
5. One of the darkest moments that this bull market suffered was the S&P downgrade of U.S. debt from AAA to AA-plus because of ridiculous political wrangling over debt limits. Shamelessly wrong yet it sure scared a lot of people out of stocks.
6. Bear markets all over the place. One of the secrets of this market is that there are, within all the bullish mirth constant bear markets mauling sectors. Consider today: housing had been in a vicious bear market until we got a monster good quarter from Toll Brothers (TOL) , the high end homebuilder. Toll never bought into the bear and bought back a huge amount of stock; it had 184 million shares three years ago, now it is 153 million. The stock ignited the whole group and it looks like the bear run has ended. Meanwhile a new bear has begun: the oil stocks. They are down huge. We also have a bear market in a lot of semis. That's to be determined but that has been one hot group. Rolling bear and bull markets define this remarkable run.
7. We have had endless woes from Europe. Greece almost defaulted repeatedly -- it is now solvent. Remember the other sick men of Europe? Portugal, Ireland, Italy, Spain? They were all on their last legs. Now Turkey' on its last legs. Each time I have tried to tell you that these issues will be solved and each time I have been ridiculed. Tiresome but not tiresome to be right.
8. China worries. We have seen China cause tremendous pain here with its stock collapse. China caused one of two flash crashes, this one in August of 2015. It's incredible that any individual stayed in this market given the either crash. But now a couple of years later we are now in fear of anything China does. Collapse and dominance? Two sides of the same strange coin. Most of the media I watch think that Trump's fight with the Chinese is a loser because President Xi plays the long game. But I think the short game that is the stock market-propped up last night by the government, by the way-may shorten what's meant by "for life."
9. We are told endlessly that an inverted yield curve means a recession and pure havoc ahead. I think that the 10-year is caught up in a massive manipulation game and should be higher. But I am not as concerned as others because we have been living with this threat for ages and we still went to all-time highs.
10. Is FAANG. We have watched Facebook (FB) , Amazon, Apple (AAPL) , Netflix and Google now Alphabet (GOOGL) , go to astounding levels. They are the big-cap leaders since the bottom. They are scorned by most. I have heard endless downgrades and coroner's inquests about the death of FAANG. I have also heard that the first A, Amazon, would destroy all of retail, and it didn't. I think a lot of the reason why FAANG survives if not thrives comes from re-invention. Facebook bought Instagram which has been a savior. Down here I would not be a seller even as its last quarter was horrendous. Amazon developed Amazon advertising and Amazon Web Services. Apple developed an amazing subscription revenue stream. Netflix went international in a big way. And Alphabet? Self-driving cars. Tremendous advertising growth. And routinely improved Youtube and Google Search.
Now I know there are many other mines and moats that have been wended through and I don't want to slight them. I think I have nailed the real electric jolts that have hit the fair weather friends and the sunshine patriots that should have just stayed put in an S&P 500 index fund and reinvested the dividends. And, of course, invested in some discretionary fliers from Mad Money. It's been a remarkable run, all the more incredible because there's never been much distance between this market being caught and mauled by the bears. Didn't' happen. Congratulations to the bulls.
