Based on his tracking, Birinyi divides bull markets into four “quartiles,” each lasting 410 days. He labels them as “reluctance,” “digestion or consolidation,” “acceptance” and, finally, “exuberance.”
The first ran from the March 9, 2009 lows and will last until April 23 of this year, according to his analysis. On average, the first quartile has a 46 percent return – far below the current 91 percent gain for the index.
Subsequent quartiles on average register respective percentage gains of 10.48, 16.58 and 28.68. The bull markets he measured were those in 1962, 1982, 1990 and 2002. Birinyi assumes the current market is a bull, though some technicians might argue that it is only a bull cycle within the broader context of a market still behaving like a bear.
“While this ‘forecast’ is fraught with potential pitfalls, unseen events and caveats, we find it just as palatable as suggesting the market should trade to 2,067 (the average peak multiple of those markets) or some Fibonacci number or other forecasts which are available,” Birinyi wrote in a research note for clients.
The forecast has drawn some notice in the markets, and ridicule from Gluskin Sheff economist and strategist David Rosenberg.
The Toronoto-based Rosenberg said Birinyi’s call was typical of “practically ever market pundit extrapolating the recent trend into the future because that is the easy thing to do.” He derisively called the forecast “perfect. Absolutely perfect.”
For his part, Birinyi was undeterred. Instead, he advised clients that, “Ultimately, our conclusion is that on a historical basis, investors should continue positive.”
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