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Smith: Only a recession will end this bull market

EDITOR'S NOTE: The following is from Hank Smith, chief investment officer at Haverford. For more of his market thoughts check out the video above.

Is 3.5 the new 10? In other words is a 3.5% pullback the new correction (which is a 10% decline). We have had several mini pullbacks and the instant hysteria it creates makes them feel like corrections.

Is that because everyone is saying the market is due for a correction? Maybe: it has been three years since we have had a correction. But the more important point is we are not near the end of this secular bull market.

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Bull markets do not end because of age; they rarely end because of exogenous events; they almost always end in anticipation of a recession. That said, the risks of a recession in the U.S. any time soon are very small. In fact, we think there is a better chance that the economy accelerates from here. That would be good for corporate profits and the equity markets.

Everyone is focused on the Fed (they have been for six years) and when the first Fed funds rate hike will be. We are with the consensus: the middle of next year. But the bigger point is, regardless of when the Fed starts raising rates, they will still be very accommodative for a very long time. This is a good back drop for the markets and the economy.

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