Bull Markets 1871 to July 2014: Duration and Magnitude (Update)

Bull Markets 1871 to July 2014: Duration and Magnitude (Update) by Greenbackd

The little wobble in the market last week made me think of a post I ran in April last year on the duration and magnitude of all bull and bear market periods in U.S. stocks since 1871 using charts from Butler|Philbrick|Gordillo and Associates’ What the Bull Giveth, the Bear Taketh Away. I’ve used Butler et al.’s method to update the charts to July 2014.

The study uses the S&P 500 price series from Shiller’s publicly available database. I use Butler et al.’s method to define a bear market as a drop in prices of at least 20 percent from any peak, and which lasted at least 3 months. A bull market was defined as a rise of at least 50 percent from the bear market low, over a period lasting at least 6 months.

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Chart 1 and Table 1 describe every bull market since 1871 in the S&P, including duration and magnitude information.

Chart 1. Bull Markets since 1871

US Bull Markets Since 1871

Table 1. Bull Markets since 1871 – Statistics

Bull Markets
Bull Markets

I don’t believe that there is anything predictive about the duration or magnitude of the average and median bull markets. I only include that information to contextualize the present market. In that sense, it is decidedly average, if a little long in the tooth. It has delivered about 9/10ths of the gains of the average, and lasted a few months less. It has run 11 months longer than the median, and generated 120 percent of the return. Only the bull markets ending in 1929, 1961, 1987, and 2000 returned more (in each case, much more), and lasted longer (in each case, much longer). Two other bull markets lasted longer–those ending in 1902 and 1968–but neither returned as much as the current one.

The two bull markets that really stand out are the January 1975 to August 1987 market, which delivered a return of 391 percent, and the January 1988 to August 2000 bull, which returned an incredible 516 percent. Each lasted 153 months. The two were separated by the 1987 bear market, which drew down only -26.4 percent peak to trough, and lasted just 5 months. Through the full period from January 1975 to August 2000, the market returned 2,140 percent, or 13 percent yearly (excluding dividends)–almost 3 times the yearly return of the long run average of 4.7 percent (also ex. dividends).

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Magnitude (Update)

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My name is Tobias Carlisle. I am the founder and managing member of Eyquem Investment Management LLC, and portfolio manager of Eyquem Fund LP. Eyquem Fund LP pursues a deep value, contrarian, Grahamite investment strategy based on the research featured in Quantitative Value: A Practitioner’s Guide to Automating Intelligent Investment and Eliminating Behavioral Errors (hardcover, 288 pages, Wiley Finance, December 26, 2012), and discussed on Greenbackd. I have extensive experience in activist investment, company valuation, public company corporate governance, and mergers and acquisitions law. Prior to founding Eyquem, I was an analyst at an activist hedge fund, general counsel of a company listed on the Australian Stock Exchange, and a corporate advisory lawyer. As a lawyer specializing in mergers and acquisitions I have advised on transactions across a variety of industries in the United States, the United Kingdom, China, Australia, Singapore, Bermuda, Papua New Guinea, New Zealand, and Guam, ranging in value from $50 million to $2.5 billion. I am a graduate of the University of Queensland in Australia with degrees in law and business (management). Contact me I can be contacted at greenbackd [at] gmail [dot] com. I welcome all feedback. Connect on LinkedIn, where we’re Friends.