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Bull Market Continues to Climb “Wall of Worry”

by AOG Wealth Management

Move over Bull Market of 1949 to 1956. There is a new bull market claiming second place (March 9, 2009 thru last Friday). Both of these runs trail the champ, which depending on variances in the definition ran from either 1987 or 1991 until 2000.

The current run has an asterisk attached, since the market must gain about 3% by May 15, 2016 (the previous high from a year ago) in order to keep its status. If the current bull market fails to reach that new high, the status will be retroactively adjusted, much like an athlete that has a championship stripped retroactively after a disqualification due to allegations of drug or money related improprieties.

The “wall of worry” metaphor was either coined in the 1930s or 1950s. It is said that bull markets climb a “wall of worry” because along the way, there are almost always reasonable doubts that the trend can continue. Bad news at home or abroad, economic fluctuations, political instability, monetary policy and solar flares are just a sample of topics that spur concern. The longer a bull market run continues the more shrill the predictions of the end become.

We believe that Modern Portfolio Theory as further evolved by the Modified Endowment Model is the best cure for bull market/bear market anxiety. Having investments in seven or eight assets classes that have low correlation to one another, and that are systematically rebalanced is the best cure. Having a portfolio with sustainable and significant income provides “dry powder” so that it is not always necessary to sell something in order to buy good assets that temporarily trade down.

So, congratulations (perhaps) to the new second longest-running bull market. We wish you well, but are prepared for your exit.

Category: Blog, Investment Management