There is a phrase I hear often, not among the public or the ‘financial’ media, but among groups of investment advisors. The phrase ‘this is the most hated bull market in history’ is perhaps working its way into the thought of the ‘average investor’. Whereas many investors (and advisors!) have been suspicious of the rally since the beginning, some are now questioning whether this rally is finished — even though many have just begun to accept that there is a rally.

This behavior is pretty much normal. Historically secular bear markets have ended with investors giving up, and being fearful and quite depressed. Then emerging bulls typically experience denial, then moving to acceptance, and finally euphoria. I’d guess we’re about in the middle of that process now.

The current longer-term bull is similar to the bull runs of 1982 through 2000, and the earlier 1949 to 1968. Eight years into the 1949 run the S&P Index* had gained 196%, and eight years into the 1982 run the S&P had gained 206%. Those were great runs, but they were not finished at the 8-year marker. Both instances went on to further impressive gains. See the chart.

Today’s long-term (secular) market is quite similar. Eight years in the 2011 to 2019 (so far) market shows the S&P with a gain of 174%.

This reminds me of 1990 when investors were at the eight-year mark of the1982 bull market. They vividly remembered the 1987 crash, and the 1990 short-term (cyclical) bear. At that time bonds were the purchase-du-jour, and it was rare to see big stock purchases. But starting in 1991 as more investors accepted the idea that equities were working again, we saw money flow into stocks.

Today, with incredibly low bond yields, interest rate bounces are creating very large bond losses.  And investors are again beginning to believe that equities might have a bright future.

Let me leave you with a quote from Warren Buffett.

“If I had a choice today for a 10-year purchase of a 10-year bond at whatever it is …. or buying the S&P 500 and holding it for ten years, I’d buy the S&P in a second.”

Good advice I believe.

Ron’s Market Minute – Time of Emerging Markets?

Emerging market stocks may be about to surge over the coming months. As measured by the EEM (iShares MSCI Emerging Markets ETF) the emerging group (up 12.8% so far in 2019) has under-performed the US markets (S&P up 23.1%). But that could be changing. While Emerging Markets have been in a strong long-term downtrend, charts show that they appear to be approaching a potentially significant breakout. And, as hopes build for a trade deal with China, more money is flowing into emerging markets. 

Over the past few days, calls on Dec 20th options have increased by about 340,000 contracts. In order to have a gain, the EEM would have to rise by about 3%. The really big bet, however, is for June 2020 calls which have seen a rise of over 283,000 contracts. This is not a small bet. The contracts have a value of about $11.5 million, and on options – unlike stocks – if the ETF doesn’t reach the strike price the traders could lose their entire outlay. Shows a lot of confidence. 

And the charts are also looking very good. If the time isn’t now, it appears to be coming soon to move back into emerging markets. Food for thought. 

Ronald P. Denk, CFP®
Investment Advisor
Denk Strategic Wealth Partners
10000 N. 31st Avenue, Suite C-262
Phoenix, AZ 85051
Phone (602) 252-8700
Fax (602) 252-8701
Toll-Free (877) The-Denk

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