Happy Birthday, Bull Market

It was five years ago last week that the stock market bottomed out at 6,547 amid the throes of the financial crisis.  March 10^th, 2009 marked the start of the current bull market and in true celebratory fashion investors looked beyond the turmoil in the Ukraine to push stocks to further gains. 

So, what would have happened if you invested at the bottom of the market?  If you were lucky enough to have invested then, you would be pocketing some substantial gains by now.  However, not all gains are created equal.

If you had invested $10,000 in a broad market index fund, it would be worth approximately $30,971 by now.  Comparing that to gold, you would have only made $4225 on the same $10,000 investment, for a total of $14,225.  If you had invested in Bonds, the value of your investment would have grown to $14,086.  Had you been too nervous to invest at all; and left your money in a Monday Market account, you would have netted $26 on your original investment.

Economic Data Remains Mixed

Financial markets have recently benefited from some better–than-expected economic data, including improvement in manufacturing as well as a rebound in the jobs market.  The February labor market reports show that 177,000 new jobs were created last month.  This represents a significant improvement over December and January, and suggests part of the earlier weakness may, in fact, have been related to the poor weather.

However, overall the economic data continues to be mixed.  Despite last month’s uptick in jobs growth, the speed of the labor market recovery remains slower compared to previous recoveries.  Furthermore, the labor market participation rate remains low and long-term unemployment high, reaffirming that the U.S. jobs market is still troubled.  Outside the labor report, the Institute of Supply Management’s non-manufacturing survey (a key gauge of the service sector) also sank to a four-year low in February.

Happy Birthday! And Many More?

In any case, it does seem that investors are looking past the weak economic data and that momentum, low interest rates and ‘good enough’ economic and earnings figures have been enough to keep stock prices moving higher.  But now that the bull market is entering its sixth year, where does that leave investors?

Russ Koesterich, Chief Investment Strategist, of Blackrock, Fidelity Investments; says equities are no longer cheap and that stronger economic growth will be needed to drive earnings and prices higher.  But he does believe stock prices are more likely to head higher rather than lower from here.  Equities still look like a more attractive option than cash or bonds.  Cash investments are effectively paying nothing and traditional areas of the bond market offer little return after factoring in the effects of inflation and taxes.

As such, he encourages investors to maintain their emphasis on stocks.  Even after a five-year bull market, and prospects for more volatility ahead, both the macro environment (low inflation, low rates and gradually improving economy) and relative valuations offer sound argument for overweighting stocks.

If you have any questions or would like to review your portfolio to ensure you are well positioned going forward, give me a call.

Have a great weekend, and Happy Spring!

Tracey

 

Source:  Fidelity Investments, Russ Koesterick, Chief Investment Strategist, Blackrock article written March 10/14.  Advisor.ca March 17 post by staff.