Santoli: This bull market may not be as old as you think it is

Tourists take a picture with the market bull near the New York Stock Exchange in New York City.
Spencer Platt | Getty Images

No one can predict when the current bull market will end. But we can all agree on when began, right?

You might think so, but no.

By the most commonly accepted definition, the bull market in stocks that followed the 'Great Recession' and global financial crisis turns eight years old Thursday. On Monday, March 9, 2009, the closed at 676, having touched 666 the prior Friday, and then reversed higher.

By the standard custom for classifying bull and bear markets, this rebound became a new bull market once it gained 20 percent – just two weeks later. And those unwritten rules say that this bull market remains in force unless and until the S&P declines at least 20 percent from a high.
That has not happened since March 2009, which is why this 250-percent advance is still generally considered one, long bull market – the second-longest ever, in fact.

Yet plenty of professional investors and longtime students of the market argue that dating the bull market to the initial snap-back rally from a 12-year low overlooks some of the setbacks since then and perhaps overstates the bull's age.

Here are some alternative start dates commonly cited by those who think the bull market truly got rolling well after the tumultuous swings around the financial-crisis climax:

Source: CNBC

September 2011: In a sort of financial-crisis aftershock, stress in European debt markets, surging oil prices and a U.S. debt-ceiling standoff struck a still-fragile economic recovery and dragged the S&P 500 down 19.4 percent from May to September that year. The decline exceeded 20 percent on an intraday basis and most global indexes suffered declines of at least that much.

The record keepers file this under the heading of "severe market correction," but to many it was close enough to consider the recovery from the September 2011 akin to a new, or renewed, bull market.

March 2013: In some respects, this equity advance didn't begin to behave as a real bull market until late 2012. Treasury yields had bottomed in mid-2012, and riskier assets benefited from the unclenching of tensions that this represented. Risk spreads on speculative high-yield debt began collapsing, and for the first time in this economic cycle, the price-earnings multiple on stocks began expanding.

By early 2013, with Washington gridlocked, the Federal Reserve looking to end quantitative easing and equities appearing cheap relative to bonds, the S&P gained upward momentum. By late March 2013, the index finally eclipsed its former all-time high from October 2007 of 1565.

Some strategists say this was the end of the "secular bear market" that had begun in the year 2000 and the start of a new "secular bull market." The term "secular" refers to a long-term structural move in asset prices. An earlier secular bear lasted from 1966 to 1982, when the Dow Jones Industrial Average was contained below the 1000 market, followed by the stupendous secular bull of 1982 to 2000.

Obviously within these periods are significant cyclical swings, often of more than 20 percent against the long-term trend.

There's no real science to defining or playing such periods. And, frankly, there have been so few that it's hard to generalize about their behavior with too much confidence.
But the idea that a push to a new all-time high touches off a decade-plus of further upward movement has some evidence behind it, and the likes of Bank of America Merrill Lynch have been using this framework since the 2013 breakout.

February 2016: The S&P 500 fell "only" about 15 percent from the summer of 2015 to the early-2016 low as oil prices collapsed and global recession and deflation fears flared.

Yet that understates the carnage beneath the surface. The small-cap Russell 2000 sank 26 percent over eight months. And Strategas Research technical strategist Chris Verrone notes that 63 percent of the stocks in the S&P 500 index fell at least 20 percent from their 52-week high.

So, bear market or not, it was a pretty good washout - one that many now argue cleansed the market of excesses, rebuilt value and reinvigorated the bull. In some ways this is akin to the Asian financial crisis of 1998, when the S&P 500 never fell by more than 20 percent but 70 percent of all stocks did. Once it bottomed, that bull market put in a ferociously lucrative final push over the next 18 months.

So how much does this matter for an investor trying to set expectations for future equity performance?

Not terribly much. Even if we say the bull is eight years old, and therefore a "mature" one, bull markets don't die of old age; they are put down by recession, financial panic or the Fed.

On the other hand, even if we decree that the bull market truly started five-and-a-half years, or four years ago, or 13 months ago, it doesn't change the fact that stock valuations are close to the top of their historical range and the eight-year returns delivered by the market are among the best ever.

Ryan Detrick of LPL Financial looked back at all eight-year periods since 1936. The past eight years' gain was only exceeded 35 times, placing the current run in the top four percent of all past periods. Most prior instances occurred in clusters in the mid-1950s, and then the late-'90s and early 2000.

The one-, five- and ten-year average and median returns following the other such periods aren't great – small losses one year out and subpar appreciation for longer periods.
Granted, those averages are heavily undercut by the Tech Bubble readings. But taken together, they suggest that no matter when you say the bull market began, it's certainly not over but it's probably not early.