US stock exchanges passed a new landmark on Wednesday when the S & P 500 took its longest rally ever and offset a nearly ten-year Wall Street boom that has increased over the course of this year.
The S & P 500 equity index, which follows the 500 largest public corporations in America, closed trading on Wednesday after 3,453 days – almost nine and a half years – with no decrease of 20% or more, which is the measure taken by some analysts is used for handing it's status as the longest bull market in American history.
The record was set with more of a whine than a roar. The S & P 500 dipped 1 point to 2,861 for the day, while the Dow Jones Industrial Average fell 88 points, or 0.3%, to 25,733, and the Nasdaq composite rose by 29 points (or 0.4%) to 7,889. But records were still recorded.
After the start in March 2009, after the financial crisis, the longest market rally comes as the world economy recovers from the depths of the last recession.
Although there have been many fluctuations over the last 10 years, including a sharp correction earlier this year, when S & P declined 10% after two weeks after the January summit, the milestone is delivered with the help of corporate tax reductions and the emergence of Internet companies such as Apple, Amazon and the owner of Google, Alphabet.
A loose definition is that a stock market switches from a bear to a bull phase when the share prices have risen by 20% compared to the previous low. The bull market continues until there is a 20% decrease from the peak when the shares return to Bear mode.
A theory that explains the terminology of the stock market comes from the way in which both animals attack their opponents. A bull pushes his horns into the air, while a bear sweeps down.
The previous record run began in October 1990 and lasted almost a decade until the dotcom bubble burst around the millennium. However, there are differences of opinion about the starting point, so celebrations about the newest milestone might be premature.
The regulatory authority of the US financial sector believes that the technical rally began in 1987, rather than 1990, which means that the current bull market should continue until at least the summer of 2021 to break the record.
Some analysts claim that the status of the bull and bear market is unclear and not compromised, and that identifying positions is an unhealthy obsession with random turning points in the financial markets.
The S & P 500 & # 39; s close to 2,861 points were within arm's reach of the record high achieved in January. One of the best performing so far this year is Netflix, Twitter and watchmaker Fossil.
The last milestone is that the US economy is going through its second longest continuous expansion, helped by the low interest rates of the Federal Reserve and slow inflation. Equity markets have also benefited since the crisis of the largest central banks in the world that pump billions into their economies through quantitative easing.
The rise of the technical companies has strengthened the general value of the US stock market. The five so-called Faangs – Facebook, Amazon, Apple, Netflix and Google – are worth more than $ 3tn (£ 2.3tn), an amount that makes them more valuable than the entire FTSE 100.
Donald Trump's corporate tax cuts have boosted US corporate earnings, putting the stock market higher. The president celebrated that shares reached record levels earlier this year by tweeting: "Dow just crashes through 25,000 Congratulations! Great cuts in unnecessary regulation."
However, the bull market trough included sharp corrections – when stocks fell by at least 10% – although it maintained its status because the falls did not exceed 20%.
A little more than a month after the American president's tweet, the Dow Jones Industrial Average plunged more than 1,000 points over fears of rising inflation, prompting the Fed to raise interest rates faster than expected. Concern over a global trade war initiated by Washington has also shaken markets in recent months and can still pose a threat.
Analysts said the US equities could continue to rise during the course of this year, although they were warned not to trust any arbitrary definitions in force, such as markets that have risen a certain period or reached certain levels.