Nine Years Of Bull Market?

When did the bull market really start? How much does it matter?

Barry Ritholtz has an interesting post up that says it is incorrect to date the bull market to when the low was hit nine years ago this week. The short version is that no one knew at the time that SPX 666 was the ultimate low. As time went on and the S&P 500 moved away from that figure, confidence started to slowly come back into the market and so it would be more correct in Barry's estimation to think of March 2009 as still part of the crisis-induced bear market and that the bull market started some time later after the low was put in. Dating the bull market then is a little more subjective.

The biggest reason that Barry believes this is important (at least this is how I read the article) is that investors started to believe that the bull market was starting to get long in the tooth as early as 2011 or 2012, assuming a 2009 starting point. Drawing this conclusion Barry says could have led to someone de-equitizing believing the end was nigh and being catastrophically wrong.

I agree that save for guessing, no one can say the bull market started yesterday or the bull ended on Tuesday or the like. Mark Haines called the bottom like within about 20 minutes of it but no one could knew in real time that he was correct. From here though, I disagree with Barry. If this article makes his radar and we were to debate I am sure he would pin my ears back but anthropomorphizing the market as some sort of animal is good for economy of words, I do it all the time, but is useless in actual investment process and I think Barry has blogged as such in the past but I could be wrong about that.

Someone who took action based on the bull market appearing to be old in 2011 without getting back in (remember the market had a rough summer that year) did so based on no form of discipline, just based on wild ass guessing and I would expect that scenario to end badly far more often than not.

In my brief time at Fisher Investments they espoused the idea that knowing an actual top or actual low is only knowable in hindsight and that resonates with me far more than anything else in part because if you have a disciplined strategy , then the times of tops, lows, bulls or bears doesn't matter. When your strategy says to take action, you take action or if you believe in holding on no matter what (valid but not my preference) then tops, lows, bulls or bears matter even less.

For anyone new, bear markets start very slowly. Six months after the peaks of 2000 and 2007 the markets were only down about 10%, giving you plenty of time for defensive action. Specifically I take defensive action slowly, in case of whipsaw, when the S&P 500 breaches its 200 day moving average, the yield curve inverts, the market averages a 2% decline three months in a row (happens less frequently than you'd think) or any combination of the three.

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