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Adam Shell launches a bull market on the occasion of the current bull market that has broken the record the longest.
USA TODAY

The stamping of an expiry date on the bull market for shares that started almost ten years ago has proven to be a lost proposition.

The long, upward increase in share prices in the US, which began in March 2009 towards the end of the Great Recession – a rally that survived countless anxiety attacks and was being questioned by market skeptics, is about to become the famous wave of the years. ninety to surpass the longest running bull in the history of Wall Street.

No bull market of course lasts, and Wall Street professionals are looking for signs of this person's ultimate downfall. But the upward climb for the Standard & Poor & # 39; s 500 equity index, which almost certainly reaches a record time of 3,453 calendar days on Wednesday without losing 20 percent, can continue.

The main drivers that push equity prices even further, market experts say, are an American economy that has been driving its fastest clip since 2014, companies that are growing their profits in eight years at the best pace and the unemployment rate of the nation now after 18 years.

These forces pushed the widest meter of the market, the S & P 500, to an all-time intraday high on Tuesday. It briefly crowned its previous report of 2,872.87 as of January. After hitting a peak of 2,873.23, the index closed 0.21 percent to 2,862.96.

"At a level of 10 meters, these economic data are positive for risky investments, such as equities," says Dubravko Lakos-Bujas, head strategist at J.P. Morgan in New York.

The increase in tax cuts for companies and ordinary Americans, he adds, should last at least mid-next year. This could compensate for obstacles and potential killers in the market: trade disputes between the US and its trading partners and the continued efforts of the Federal Reserve to bring interest rates back to normal after seven years after the financial crisis of 2008 almost 0 percent had linked.

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During this bull run, the S & P 500 recorded a profit of almost 325 per cent, overcoming all kinds of shocks, from government shutdown and the loss of the AAA rating, to natural disasters and threats from a nuclear war. The bull from the nineties, which yielded a profit of 417 percent to investors before he started roasting in March 2000 when the growth of the internet stock failed, is still number 1 when it comes to performance.

The profits of recent years have been driven by innovative technology companies such as Apple, online retail giant Amazon and video streaming service Netflix, whose products have changed the way Americans communicate, shop and watch movies. According to S & P Dow Jones Indices, S & P 500's technology sector accounted for more than 22 percent of the bull market's rise in the index.

After being burnt during the last beer market when stocks lost more than half their value, many Americans who had fled from the market never returned. More than 40 percent of them surveyed by Gallup in April said they had no money invested in stocks. But the 55 percent that held the course converted an investment of $ 10,000 in the S & P 500 at the beginning of the bull to about $ 42,500.

That's a profit of more than $ 30,000.

But while there are enough risks to worry about, do not count on the aging, aging bull, just because he lived longer than anyone else who came before.

"The idea that just because the market has been going on for a long time means it has to drop, there is no historical support for that idea," says Charlie Bobrinskoy, vice chairman and head of investment at Ariel Investments, a Chicago-based company. fund company.

What could the bull keep going?

Although the bull is on the verge of rewriting the record books as the longest ever, many of the things that have killed bull markets are absent – at least for the time being.

Firstly, stock prices are not as ridiculously expensive as at the peak of the market in 2000, when the shares in the S & P 500 traded more than 26 times their profits in the past 12 months. Currently, the price / earnings ratio of the market, or P-E, around 19, is only a shadow above the 30-year average of 17.6, according to profit-tracker Thomson Reuters.

"There are times when the market is ridiculously cheap or expensive, but that is no longer the case," says Bobrinskoy, adding that it is easier to predict the next move of the market when stocks are extremely traded.

Another important substantiation of the market remains the healthy profit picture.

Companies in the S & P 500 are on track to increase profits by nearly 25 percent in the quarter that ended in June, after a jump of nearly 27 percent in the previous quarter. The profit has not grown so fast since 2010 and analysts expect profit growth of up to 20% in the last half of the year, according to data from Thomson Reuters.

"The only thing that counts is the profit," says Tony Dwyer, market leader for Canaccord Genuity. "And in the near future, the direction of profit is higher, and that's what the markets are moving."

Dwyer also notes that there are signs of a recession, and he disputes the concern that the stock market will dive if there is a so-called "inversion of the yield curve", which often means a coming recession. This phenomenon occurs when the interest on the 2-year government debt rises higher than that of 10-year government bonds. Currently the 2-year bond yields 2,612 percent and the 10-year bond 2,843 percent.

Although less than a quarter of a percentage point separates the two returns, Dwyer distances himself from the fears, noting that the stock market has reached a profit of more than 21 percent, about 22 months after the yield curve returns to 1965, and recessions have scored 24. months later, on average after reversals.

Working in favor of the shares is the stimulus injected into the financial system by the tax cuts of President Donald Trump, a boost that still offers room to run, according to J.P. Morgan & # 39; s Lakos-Bujas. More fuel for equities, he says, comes from the huge amount of shares repurchased by companies, a trend that reduces the number of shares to be sold in the open market and can push up prices.

What could the bull derail?

The time to worry is when stocks become so popular that they are the only thing people are talking about, says Savita Subramanian, head of US equity and quantitative strategy at Bank of America Merrill Lynch. "It's time to get out when nobody talks about what can go wrong and think that stocks will rise forever", she says.

At the moment there is enough fear of impending doom in the market to prevent euphoria from getting out of hand: with investors in mind there is fear of a full trade war between the US and China, more interest rate hikes from the US central bank and worry about the health of emerging market economies amidst the currency crisis in Turkey.

Another real worry is if something goes wrong while the Federal Reserve tries to extract the incentive from the system by raising interest rates and reducing the massive $ 4 trillion of bonds it now holds, warns Subramanian. The Fed has bought treasury bills and mortgage-backed bonds after the financial crisis to reduce financing costs and encourage investors and companies to take more risks.

"There can be many unintended consequences," she says.

A deterioration of the trade dispute between the US and China could also harm the bull, and rapidly emerging technical stocks that could be hurt by higher prices for technical components due to disruptions in the supply chain, says Kevin Landis, president and president of Firsthand. Funds.

Jim Stack, president of money management firm InvesTech Research in Whitefish, Montana, says that stocks can suffer if inflation rises and the Fed should raise rates faster and more aggressively than investors had expected.

While Stack now gives the bull the benefit of the doubt, he warns of a new market for bruises on the bear market, or a downturn on the market, which could shave 40 percent of the market.

"When it ends, it will end poorly," Stack warns.

Adds Rob Arnott, founder and president of Research Affiliates, a Chicago-based investment company:

"Bear markets are not always forbidden," he says. "There will be another bear, it can be next year or in the next five years, I do not know when, but it's coming."

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