That’s a Lot of Bull, Part 2

America’s stock markets attained a couple of milestones this week: the longest bull market ever and, ironically, the longest correction since 1961!  How can we reconcile the two?

In Bull, Part 1 we released last week, we defined various basic parameters for a bull market.  The most commonly accepted definition considers a bull market's start when the stock market begins to advance from the lowest price reached following a selloff of 20 percent or more, but it must ultimately reach a new all-time high before truly earning that distinction. Interestingly, this can vary depending on the scale being used.  For instance the Dow Jones Industrial Average (DJIA) might hit a new high before the S&P 500 does, allowing us to say the DJIA is in a bull market even though the S&P has yet to confirm it.

What about bear market?  Simply put, that is defined by the 20 percent drop from an all-time high alluded to in the prior paragraph.

In between these two points, markets fluctuate, and sometimes by rather appreciable amounts.  Convention suggests if a decline of 10 percent happens from a bull market peak then we call it a bull market correction.  Similarly, an advance from a bear market low of 10 percent gives us a bear market correction.  In either case, the correction can ultimately morph into an official change in status, but only by hitting new highs or lows as the case may be.  From a bottom, the market could double and still not officially be a bull if it hasn't achieved the all-time high milestone.

Since, by definition, both bull and bear markets are determined by a measured move from a specific peak or trough respectively, you will always be in one before you know it!  The sobriquet is earned essentially after the fact.  If that seem like a lot of nonsense to you, join the club.  As measured by the S&P 500, the stock market hit its first new all-time high since the 2009 bottom back in 2013, officially gaining bull market status.  In February of this year it fell 10 percent from the peak established just a month prior, putting the market officially in a correction, but not yet a bear market.  Having just attained a new all-time high, the market has also finally moved out bull market correction status.

Atlas doesn't really care so much about the definition.  What we do care about is guarding and growing the value of your account no matter where talking heads say we are in any market cycle.      (Christopher and J R)