The end of the longest bull market in history (2009-2020)

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We all knew this day was coming, so we bow our heads in awe of what will be remembered as the longest bull market in history.

On 11. March 2020, the dow jones industrial average (WKN:969420) closed at 1.465 points or nearly 5.9% loss. More importantly, it broke through the important psychological level of closing more than 20% below its all-time closing high. That's right folks – the dow jones is officially in a bear market.

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The other major stock indexes in the united states, the nasdaq composite (WKN:969427) and the S&P 500 (WKN:A0AET0), are also knocking on the door of a bear market. Both indexes are down 19% from their all-time closing high, set just 16 trading sessions ago. If wall street's predictions prove accurate, it's only a matter of time before the nasdaq and S&P 500 join the dow in going officially bearish.

Perhaps the most interesting thing about the end of the longest bull market in history is what occurred at its end: a virus about 120 nanometers in size. Despite a trade war between the U.S. And china, the european sovereign debt crisis, brexit and civil wars in oil-producing regions such as iraq and libya, it was the 2019 coronavirus (COVID-19) that was ultimately responsible for ending the monumental market run. This shows once again that we rarely know what will lead to a bear market before it happens.

Why did the bull market last so long?

Before we get into what happens next, I think we should reflect on the unique situation that allowed the bull market to last as long as it did.

One factor explaining such a long period of bullishness is the federal reserve's loose monetary policy. Between december 2008 and december 2015, the federal reserve kept its benchmark interest rate (d. H., the rate the federal reserve charges other banks and credit unions as fees) at a historic low of 0 to 0.25 percent. Even when the fed raised rates by 25 basis points on nine different occasions between december 2015 and december 2018, it did so with method and announcements well in advance. In other words, the fed left the barn door wide open for businesses to borrow at attractive interest rates, resulting in a lot of hiring, deal-making and innovation at the corporate level.

Another factor to consider is that in december 2017, president trump signed into law the most comprehensive tax reform in more than three decades. The tax cuts and jobs act resulted in moderate adjustments to individual tax brackets, but ultimately the top corporate tax rate was reduced from 35% to 21%. As publicly traded companies were able to keep a larger portion of their operating profits, many of them used that extra cash to buy back their own shares or, in rarer cases, to increase dividends to shareholders.

Share buybacks at S&P 500 companies hit a new record of 806 billion in 2018. U.S. Dollars, with goldman sachs predicting in october that S&P 500 company buybacks in 2019 would total about 710 billion. U.S. Dollar will make up. Compared to this, repurchases by S&P 500 companies between 2012 and 2017 were between 400 and 600 billion. U.S. Dollar annually. Because buybacks reduce the number of shares outstanding in public companies, they can have a positive impact on earnings per share and make a stock much more attractive to investors.

In addition, don't overlook the impact that technology is having on the marketplace. Since the advent of the internet in the mid-1990s, it has become increasingly easy for everyone to trade stocks and securities. With the ability to access information and press releases by tapping or swiping a finger on a smartphone, wall street and the little guy are operating on a level playing field. This ability to quickly disseminate and gather needed information has helped investors focus on what matters most.

A new bull market could be here before you know it

While investors are undoubtedly sad to see one of the most impressive bull runs in history come to an end, we shouldn't mourn for too long. Because history has shown that stock market corrections are a normal part of the investment cycle and that they usually last much shorter than periods of expansion.

Since the beginning of 1950, there have been 38 official stock market corrections in the S&P 500. By "official," I mean declines of at least 10% from a closing high, without rounding up to the nearest whole number. Excluding our current correction (since we don't know when it will end or how severe the decline will be), 23 of the 37 previous corrections in the S&P 500 ended after 104 or fewer calendar days. That's just 3.5 months.

Moreover, protracted corrections have been particularly rare over the past 36 years. As mentioned earlier, the rise of computers and the internet has made it easier than ever to disseminate information. As a result, the rumor mill will be kept in check and investors can focus on the facts. Although there is always panic, as we are experiencing right now, emotional trading tends to be short-lived.

In fact, in the last 38 years, we've only had three instances where a correction took longer than six months to bottom out. In 1983/1984 it took about ten months, 929 calendar days during the dotcom bubble and 517 calendar days during the financial crisis.

But what can be rightly argued here is that we have no failure of any of the financial institutions that led to such events as the financial crisis. Rather, we have panic regarding the spread of COVID-19. Correcting investors' outlook and responding to this malady will likely prove much easier than trying to prop up financial markets, which leads me to believe that this downturn will tend to be one of the shorter ones.

If you're in on this downturn, you could be very happy very soon

Considering all of this information, it's no surprise that smart investors who choose to buy top stocks during times of fear usually do well over the long term.

Visa (WKN:A0NC7B), for example, could see consumer sales decline in the short term as people choose to stay home more often. But if we as investors learned anything during the financial crisis, it's that very little can keep a company with enormous competitive advantages down. Visa holds 53% of the credit card market share in the U.S. By volume of purchases, and has a huge international opportunity as consumers in regions with few banks switch from cash to plastic. The best part is that visa is not a lender, so loan defaults are not a big problem.

Then there's hospital operator HCA healthcare (WKN:A1JFMW). HCA has lost nearly a quarter of its value in recent weeks, but could be one of the main beneficiaries of COVID-19 disease. We would prefer that our hospitals not be flooded with patients, but COVID-19 testing and care for the most vulnerable patients will become the norm in the foreseeable future. Not to mention that senator bernie sanders of vermont continues to lag behind former vice president joe biden in the democratic party's presidential bid. As a result, it looks unlikely that there will be any real healthcare reform anytime soon. This is positive news for HCA healthcare.

For investors with a lower tolerance for risk, AT&T (WKN:A0HL9Z) is a company that has been very successful in the telecommunications sector. With AT&T's wireless customers taking out subscriptions, it's highly unlikely that the churn rate will increase any further. This is especially true as AT&T rolls out its faster 5G network and smartphones have become a kind of necessary staple. AT&T may also benefit from people staying home more by leaning on its traditional cable and streaming offerings.

There are a lot of great companies at valuations that we have not seen so cheap for a long time. In short, don't mourn the end of the longest bull market in history. Be thankful that you can buy in at a discount before the next bull market takes shape.

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