"You're only as old as you feel" is a cloying platitude. Yet it also captures an admirable attitude — one that the current bull market has apparently assumed.
Three months from its eighth anniversary and one month from becoming the longest bull market on record, the long climb that began in March 2009 is behaving lately as if it's a good deal younger.
For one thing, riskier and more economically attuned stocks have roared to the fore in recent months. The Russell 2000 small-cap index late last month notched 15-straight days of gains, for the first time since 1996. It bested other long win streaks from 2003 and 1988. All those dates were either early in the market's surge off a bear-market low or in a midcycle acceleration phase.
The sectors that have sped ahead the past month similarly resemble the leadership of a less-advanced rally. Financial, industrial, commodity and consumer-discretionary stocks have done best.
Entering 2016, a common call was to stick with large, "high-quality" multinational stocks, given a fully valued, mature bull market, slow-and-steady global economic growth and a relative dearth of profit growth. That worked for half the year as bond yields plumbed new lows, but reversed in late summer and was wholly upended following the election of Donald Trump.
The acceleration of this "reflation" trade, hinging on quicker growth and fiscal stimulus, sent a spasm of withdrawals from bond funds and inflows into stocks. This bull market has been notable for the lack of retail excitement over stocks, as post-crisis malaise, excessive discomfort with aggressive Federal Reserve policies and muted growth kept the public skeptical.
One result: The market has largely avoided the valuation distortions and overheated themes that sometimes build up as bull markets roll on.
As Credit Suisse strategist Andrew Garthwaite put it in his 2017 outlook, "There has been no clear excess in equities: Peaks in equity bull markets have previously been marked by some kind of excess, whether in terms of investment fads, sentiment, valuation or leverage — no such excess is apparent to us yet."
Laszlo Birinyi of Birinyi Associates, a longtime student of market history, charted the four longest bull markets of the past 50 years and found the current one a good deal more subdued in its trajectory — especially in the past two years, when the flattened out.
"One critical point from this chart is that the other three sustained markets spiked at the end," Birinyi said. "We have noted this before, and it is one of the elements of our positive stance: Unlike old soldiers, markets do not fade away."
Excitement over imagined business-friendly policies and a shakeout in bonds have certainly stirred up plenty of talk that the Trumponomics "story line" could finally get investors' animal spirits to well up and deliver one of Birinyi's gaudy "spikes."
