Longest Bull Run in History

On Aug 22, the US stock market surpassed the 3,453-day previous record to officially become the longest bull market run of all time. That is almost nine and a half years without seeing a major correction (a drop of 20 per cent or more).

This is certainly good news for investors who have chosen to stay invested during this entire period but leaves many wondering what will happen next.

This current rally started in March 2009 following the financial crisis dubbed the “Great Recession”. This post-recession bull-run may be the longest in history, but it has also been one of the slowest, with many companies and countries still recovering from that big hit.

This slow recovery has many analysts predicting the current bull run still has a couple more years to go. I did a quick survey of various predictions and it showed the majority guessing it would end anywhere from six to 24 months from now.

Seasoned investors and money managers know that the party can’t last forever. The run could be ended by U.S. political drama, a global trade war, emerging market instability or possibly even another yet unknown trigger.

The U.S. Fed has hiked its benchmark lending rate twice since January and is expected to raise it two more times by the end of this year. Three of the past five recessions were preceded by rate hikes and these higher interest rates may convince more investors to move from stocks to bonds. They also increase the costs for companies and make expanding operations more difficult.

What we do know for sure is that this bull run will come to an end at some point and the odds are that it will do so sooner rather than later.

So, what should you do? This is not meant to be a panic alarm telling you to sell everything and go to cash, but you should consider taking a more defensive position with your portfolio. At bare minimum, you should look to rebalance your portfolio back to your original target allocations if the equity components have increased in overall weightings due to this growth.

Anyone who has an equity portfolio that lacks diversification, especially one that is mostly or all Canadian stocks, should look to diversify across different sectors and geographical regions. Look to reduce exposure to companies with higher “bear beta scores” as well.

Trying to time the market and guessing when you should be in or out is a dangerous game as nobody knows for sure when market events will occur. But you should be comfortable with your overall plan and this is a great time to rededicate yourself to the basics of your financial plan, savings and debt reduction strategies.

Take steps now to ensure you’re well protected so that when the next major correction does come, you can sit back knowing that you’re ready to weather the storm.