As Wall Street prepares on Wednesday to celebrate the current U.S. bull stock market becoming the longest in history, some investors are keeping corks in their Champagne bottles.
Not all stock experts will honour the milestone because they use different definitions of bull and bear markets.
While one group is widely recognized for determining U.S. economic cycles – the National Bureau of Economic Research – no such body is uniformly accepted for defining bull and bear markets.
Merrill Lynch, research firm CFRA and S&P Dow Jones Indices are among the Wall Street organizations that will recognize the current bull market becoming the longest on Wednesday.
On that date, in their view, the bull market that began on March 9, 2009, will surpass the run from 1990-2000 in terms of calendar days.
But another group of market watchers – including experts at Yardeni Research, Bespoke Investment Group and SunTrust Advisory Services – observe a bull market from 1987-2000 as the longest. By that standard, the S&P 500 needs to last almost three more years to set the record for longevity.
Both groups generally find that bull markets end upon a 20-per-cent decline from a peak. In this case, but a sticking point is a 19.9-per-cent decline on a closing basis from July to October of 1990.
Investors eyeing this Wednesday as the record-setting date call that decline a bear market, which interrupted the 1987-2000 bull run, while others do not.
CFRA classified the 1990 decline as a bear market because the S&P 500 fell 20 per cent when rounded and because it surrendered more than 50 per cent of what was gained in the prior bull market, chief investment strategist Sam Stovall said in a recent note.
“However, we respect the opinions of those who don’t agree,” Mr. Stovall said.
The differences in defining bull and bear markets don’t stop there.
To Michael Batnick, director of research at Ritholtz Wealth Management, a bull market begins once the previous bull-market highs are broken, not when a bear market ends.
Therefore, Mr. Batnick wrote earlier this month in his blog, The Irrelevant Investor, he has long thought the current bull market began in March, 2013, not March, 2009.
Ned Davis Research, which the Stock Trader’s Almanac relies on for defining bull and bear markets, says that a cyclical bull market requires a 30-per-cent rise after 50 calendar days or a 13-per-cent rise after 155 calendar days.
The investment research group, which uses data from the Dow Jones Industrial Average to define its cycles because there are more historical data, defines the current bull market as starting on February 11, 2016, while the longest bull run lasted from 1990-98.
“We do not subscribe to the arbitrary 20-per-cent rule for bears,” said Jeff Hirsch, editor of the Stock Trader’s Almanac.
Willie Delwiche, investment strategist at Baird in Milwaukee, Wis., who also adheres to the Ned Davis Research definitions, said that determining cycles is useful for historians because it “allows you to place a certain market move in context of past market moves.”
But, Mr. Delwiche said, “it doesn’t give you much of a real-time edge, regardless of which definition you use.”