The American bull market is now officially the longest ever. From the depths of the financial crisis, revived by central bank stimulus, fueled by technological innovation and finally a shot in the way of tax cuts, the S & P 500 lost 3,453 days without a 20 percent drop, the decline which is characteristic of a beer market. That cuts it past the bull runs from 1990 to 2000 that culminated in the dotcom boom.
Like the bull market that surpasses it, the rally of March 9, 2009 also coincided with a technological revolution; in this case the rise of the digital economy and reflected in the reorganized leadership of the S & P 500.
In March 2009, respectively, ExxonMobil, Walmart and Microsoft were the largest companies in the index to market capitalization. At the top of the scoreboard are now Apple, Amazon and Alphabet. Facebook, at the No. 6 spot, was not even a listed company when this bull run first started. Microsoft may have passed the transition to the cloud to maintain a top slot; IBM has not been so successful.
The stock market stars of the digital economy even got a nickname when the bull market was on the brink for longer: the Faangs. If you had dropped 99 percent of the S & P 500 and focused on the giants that seem to have troubled the daily life of the consumer – Facebook, Apple, Amazon, Netflix and Google's mother alphabet – then you'd be the bull market have performed much better. Concern about privacy, increased regulation and growth prospects of these technology companies are not only important questions for the sustainability of their price gains. They are now central to the outlook for the total bull market.
But 3,453 days ago all eyes were on the banks. Low brought by excessive risk appetite and then the bankruptcy of Lehman Brothers, they had just been recapitalized with injections of taxpayers' money and doubted their future. Investors who pulled through the rubble have wisely defeated the S & P 500 on some of the largest banks.
The market value of the S & P 500 has risen from 312 percent from 9 March 2009, a droning $ 18.4tn. But in a different way, the market is shrinking. The number of shares in the S & P 500 fell by 3.1 percent – a factor that, according to some, creates a scarcity value that has increased profits.
After a burst of equity issuance in the aftermath of the financial crisis, particularly by banks that rebuilt the balance sheets, the number of shares has fallen sharply. The reason? A wave of companies that buy back their own shares.
That fierce course has supported share prices and supported the important earnings per share. Economic growth and major tax cuts at the end of last year are the main factors, but buy-backs have also helped S & P 500 companies report quarterly earnings growth of close to 25 percent per share. The buy-back trend has accelerated due to the repatriation to the US of profits that were once held overseas to avoid tax; Goldman Sachs believes US companies will buy back a $ 1tn record of their own shares this year.
Drink a glass of champagne to celebrate the record length of the bull runs, but remember that it still has an important place before it becomes the most lucrative.
The index ended Wednesday with 323 percent from the start of the bull market, which was a 417 percent backlog compared to the 1990-2000 period. The last rally was actually pretty slow, with an annual rate of 16.5 percent compared to the average of 22 percent for bull runs in the US.
The fastest? The 35.5 percent annual pace of the bull market 1932-1937 that followed the stock market crash of 1929.