Despite the many global trouble spots the bellwether American index, the S&P 500, is near its all-time high. The upswing on the US equity market has now already been running for 9.3 years, which is one of the longest bull markets ever. A bull market is defined as a continuous uptrend of at least 20% without a setback of 20% or more. To be very precise and also taking equities’ intraday fluctuations into account, we are currently going through the longest equity market cycle of all times. But we prefer the variant with monthly stock prices, which paints a smoothed picture.
But whether we are now going through the longest or one of the longest bull markets is of only secondary importance. The upswing has now existed for a very long time and as every upswing in the equity market has in the past been followed by a downturn it is much more important to ask how long the bull market can still last.
As there has recently been a strong accumulation of global crises, there is a risk that these could in the medium term have a greater impact on the economy and the equity markets. While the negative effects resulting from the individual crises are not very dangerous when looked at in isolation, in the near future the point could be reached at which the sum of all negative factors might lead to stagnating or even falling corporate profits. This would very likely spell the end of the bull market.
However, we believe the political conflicts around the globe are more likely not to escalate further and that economic growth will stabilize again. Especially the European equity markets, which have recently suffered more severely from the global disputes, would then again be characterized by an environment of growing corporate profits and lower capital market rates and could chalk up share price gains. For this reason we remain upbeat for the equity markets, and the bull market should continue for a long time yet.