Breakout

Bull markets don’t die of old age, why Dow 44,000 is coming

Jeff Macke
Breakout

No matter what you read in financial media, no bull market has ever died of old age. It makes for an interesting data-mining experiment to compare the duration of historic bull markets, but it’s simply not an actionable piece of information.

For those of you who think otherwise, it’s going to be a long ten years, at least as far as Brian Belski of BMO Capital Markets is concerned. Belski thinks the current bull has at least another decade of 10% annual returns in it. In the attached clip he lays out his case.

“We’ve been on record since the 4th quarter of 2008 saying that U.S. stocks were entering a 15- to 20-year bull secular bull market," he says. "While people have come around to being more bullish, I don’t think people believe we have another ten years left.”

That lack of faith is perhaps the most compelling aspect of the bullish case for stocks. History suggests great stock meltdowns take a generation to rebuild. For millennials who have seen nothing but a series of catastrophic market volatility, the idea of buying and holding stocks for the long term is horrifying. Anyone who saw their parents lose everything they’d invested in former blue chips such as the original GM, or Citigroup (C) at a reverse split adjusted $500, has every reason on earth to be skeptical of the stock market’s prospects for the long term.

Being short-term bullish is different than the type of unalloyed faith seen at the top of markets. Ten years ago it was unthinkable that a company like, say, Lehman Bros could disappear. Today it wouldn’t really surprise anyone to see an industrial giant disappear. That’s key because what really kills bull markets isn’t advancing years but a lack of skepticism followed by negative shocks.

Nothing is shocking anymore. Until it is, stocks are better to buy than sell.

“There remains a tremendous amount of fear with respect to my industry,” says Belski, referring to financials. “Investors don’t trust us, regulators are tough. All of that will normalize over the next several years. That is excessively bullish for the market.”

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