Bull and bear markets are integral parts of the economic cycle. There is a saying that bull stock markets don’t die of old age. They come to an end because of speculations, wars, political uncertainty, and credit crunches. The current bull run has been dubbed as the longest bull market ever. Here we take a look at the top 10 longest bull markets in modern American history.
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So, what is a bull market? It's when a stock index rises at least 20% from its most recent lows. And the bear market occurs when stocks drop 20% or more. However, some people don't agree with the definition. That's why they believe that the current bull run is not the longest on record. The bull market ends and bear market begins when an index declines 20%. But what if the index drops 19.5%? There is some grey area here.
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These are the ten longest bull stock markets since the year 1900. It could be mere co-incidence, but five of the ten longest bull markets started in the month of October.
10- Second World War, 49 months (Apr 1942 - May 1946)
America was not an active participant in the Second World War until Japan bombed Pearl Harbor. The US entered the WWII in December 1941. Young men went to Europe and Asia to fight. More and more women entered the labor force as factories ramped up production of defense equipment and other supplies. As the war raged, the bull market began in April 1942 and ended in May 1946. The S&P 500 index gained 158% in those 49 months.
9- The beginning of Cold War, 50 months (Oct 1957 - Dec 1961)
The Federal Reserve had raised interest rates in 1956 to curb inflation. The Suez crisis and the Hungarian Revolution were weighing down on stocks. The Soviet Union launched its first man-made satellite in 1957. The bull market sprung up in October 1957. The S&P 500 index gained 86% between October 1957 and December 1961. But the stocks declined 28% in the first half of 1962.
8- Post-Great Depression bull market, 57 months (June 1932 - Mar 1937)
The Great Depression was the most significant economic event in modern history. The S&P 500 index's predecessor Composite Price Index had tumbled 86% between October 1929 and June 1932. The bull market that began after the Great Depression drove the index up 325% over the next 57 months. Fueling the growth was President Franklin Roosevelt's massive government spending. The bull run ended in March 1937 when Roosevelt started reducing the federal spending.
7- The housing bubble, 60 months (Oct 2002 - Oct 2007)
The housing boom of 2002-2007 pulled off a 102% gain for the S&P 500 index. Record low interest rates, excessive leverage, and subprime mortgages enabled people to buy homes at ridiculously high prices even without a down payment. And most of us vividly remember how it ended when borrowers started defaulting on their mortgages. The S&P 500 index plunged 56.8% between October 2007 and March 2009.
6- Reagan-era bull market, 60 months (Aug 1982 - Aug 1987)
Fed chairman Paul Volcker's decision to dramatically raise interest rates to to tame inflation had also ushered the US economy into recession in 1980. After assuming office in 1981, President Ronald Reagan slashed taxes to revitalize the economy. Thanks to falling interest rates, lower taxes, and a flurry of corporate mergers, the US stocks entered a bull market in August 1982. The S&P 500 index shot up 229% in five years before the bull run ended in August 1987. On October 19, 1987, stocks tumbled 22.6% in what is now known as Black Monday.
5- The limping bull, 74 months (Oct 1974 - Nov 1980)
It is one of the longest bull markets in the US history, but it was a slow recovery from the 1973 bear market. Between October 1974 and November 1980, the S&P 500 gained 126%. Investors had lost confidence in the stock markets because of the oil crisis and the collapse of the monetary agreement among Western countries.
The end of the Vietnam War and rising corporate profits helped bring back positive sentiments. However, inflation remained high through much of the 1970s. In 1979, Fed chairman Paul Volcker raised interest rates to sky high levels to control inflation. One of the side effects of his actions was the recession in 1980.
4- The peacetime boom, 86 months (June 1949 - Aug 1956)
After the World War II, most economies were struggling to recover from the destruction. The United States enjoyed an era of prosperity. President Dwight D. Eisenhower meticulously balanced the federal budget.
Americans were having more children. They were buying cars, TVs, and homes like never before. Between June 1949 and August 1956, the S&P 500 rose about 267%. The bull market ended in August 1956 when the Federal Reserve raised interest rates to curb inflation.
3- The great bull market, 96 months (Oct 1921 - Oct 1929)
The World War I and Spanish Flu outbreak of 1918 had killed nearly a million Americans. During the 1920 depression, business activity in the US had declined 38% and unemployment was at 12%. The economy started showing signs of recovery in 1921, and Americans seemed prepared to embrace a new era of peace and prosperity.
In the 8-year-long great bull run between October 1921 and October 1929, the S&P Composite skyrocketed 409%. It was one of the strongest and longest bull markets in modern history. People believed that America had entered an era of "permanent prosperity." Then the Great Depression happened in 1929. Between 1929 and 1932, the US stocks lost 86% of their value. Millions were left jobless and penniless. Billionaires went bankrupt. And the market did not reach its October 1929 peak again until 1954.
2- The Dot-Com boom, 113 months (Oct 1990 - March 2000)
The roaring bull run of the 1990s was fueled by tech stocks. The end of the Cold War also helped push America towards greater prosperity. Between October 1990 and March 2000, the S&P 500 index gained 417%. Investors had just realized the potential of the Internet Age. They were aggressively investing in any stock with a dot-com in its name. Many of those companies vanished when the dot-com bubble burst in 2000.
1- Prolonged recovery from the Great Recession, 131 months and counting (Mar 2009 - Present)
The S&P 500 index hit the bottom of 676 on March 09, 2009. The US stocks have been rising slowly and steadily for more than a decade. The decade-long rally has become the longest bull market in modern American history. The S&P 500 has risen from the bottom of 676 on March 09, 2009 to 3,370 as of February 18, 2020. Despite the Eurozone debt crisis and the US-China trade war, the market hasn't lost its momentum for more than a decade. The recovery from the Great Recession of 2009 was helped by the Federal Reserve's unprecedented quantitative easing program.