Fri. Jan 28th, 2022

On Friday, the S&P 500 ended at an all-time high.

It was the fourth all-time high in so many days. This year alone, the S&P has reached 48 new highs.

Since we finally broke the pre-GFC highs of 2007 in the summer of 2013, we are now examining more than 320 new highs in this bullish market:

This accounts for more than 15% of all trading days at this time. Thus, over the past 7 years, the U.S. stock market has reached a new high every 7 days or so.

Historically, the stock market has recorded highs of 5% on all trading days, but it would make sense for this number to be higher during a bullish market.

There were no new highs from October 2007 until the end of the summer of 2013. There was a similar drought from highs in early 2000 to 2007. In fact, since the change in century until the new highs in 2013, there were only 13 historical highs.

So almost 14 years with only 13 new highs and then 7 years with over 300.

The 21st century has been defined by all-or-nothing market cycles.

From January 2000 to early March 2009, the S&P 500 fell more than 45% in total.

A lost decade marked by two huge accidents.

Then it took off like a rocket.

With total profitability, the S&P 500 took less than two years to double the March 2009 lows. From that level, it doubled again in 6 years. In less than 4.5 years it doubled again of these levels even higher.

Since the lows of March 2009, you have almost a new bagger in the S&P 500.

Ten bucks invested in the S&P 500 on March 9, 2009 would now be worth about $ 85,000. That same $ 10,000 invested in a total bond market fund would be worth about $ 11,600.

Doing the same exercise between 2000 and 2009 would have earned only $ 9,000 in S&P and $ 18,000 in the bond fund.

Party or fam.

But even the current bull has not always been easy.

Remember the talk about the recession that took place in 2010? Or the European debt crisis of 2011? Or that random bear market that hit rock bottom on Christmas Eve 2018?

The S&P 500 has undergone many corrections during this bullish market:

It has six double-digit corrections with an average decrease of almost 19%. The difference between this cycle and the last is that these corrections did not last long, while accidents in the early 2000s were measured in years rather than months.

Here’s another way of saying we’re in a bullish market: the stock market is crushing gold:

Over the past ten years, the S&P 500 has risen nearly 360%, while gold has fallen 2%.

This is a lost decade for gold, even after rising by 25% in 2020 and 18% in 2019.

To be fair to yellow metal, the stock market lost a decade of its own to start the 21st century, while gold did pretty well:

Here is a developing topic.

I could go on but you get the picture.

I don’t know what that means for future markets, but market extremes like these are sure to play with the psyche of investors.

After the explosion of the dot com and the great financial crisis, investors were conditioned to wait at all times for a market crash shattering bones. People have predicted the biggest accident in history since the last one ended. It never came.

And now investors are conditioned to wait for markets to recover quickly every time they fall. Buying the f * cking deposit is the best investment strategy of the last ten years.

Setting the right expectations is essential for survival as a long-term investor, so thinking about either end will end up biting you again.

Market crashes are inevitable, but you can’t expect them to happen every year. And most fixes are short-lived, but not always. Sometimes stocks go down a lot more than you think they can.

Maybe the next ten years will be the last ten years and each recession will be faster than a Detroit Lions head coach’s career.

Or perhaps we will see that another lost decade follows the strong gains of the current cycle.

We may also see something completely different from the market environment of the 2000s and 2010s.

Regardless of what happens next, thinking about extremes will end up causing disappointments as an investor, as good or bad times don’t last forever.

To read more:
As good as it gets?

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