Insights and Market Perspectives

You don’t want to miss the end of this bull market

Author: Portfolio Specialist Group

October 6, 2017

If one is looking for reasons why the S&P 500’s current bull market may end anytime soon, you do not need to look far – geopolitical tension with North Korea, catastrophic weather with Hurricanes Harvey and Irma, valuation concerns and importantly, the tightening of monetary policy, to name a few. Time is also a troubling factor. With the current bull market extending 98 months in duration, history would suggest that a correction is long overdue.

While an investor’s initial reaction may be to get out of this rally before a correction occurs, the end of bull markets have been painful to miss, generally concluding with strong returns. In the 12 most recent bull markets dating back to 1937, the 12-month period preceding the peak have accounted for approximately one-fifth of the returns during the entire market cycle, on average, gaining 25%.

Historical S&P 500 total returns preceding market peaks since 1937

Source: BofA Merrill Lynch U.S. Equity & Quant Strategy, Bloomberg, S&P, September 2017

 

Average daily performance index of S&P 500 before and after market peaks

Source: BofA Merrill Lynch U.S. Equity & Quant Strategy, Bloomberg, S&P, September 2017

 

Despite concerns over an abundance of issues all significant enough to trigger a material correction, the S&P 500 has continued to show remarkable resiliency, on pace for double-digit returns yet again this year. We believe there is further room to run as we approach Q3 earnings season, given the depressed U.S. dollar providing a tailwind for foreign trade and energy prices stabilizing. Well-executing companies should continue to outperform before this bull market officially comes to an end, providing an opportunity for active managers, like ourselves, to take advantage of these opportunities and strong-performing stock markets to add value for our clients before the tide turns.

 

 

 Commentaries contained herein are provided as a general source of information based on information available as of September 25, 2017 and should not be considered as personal investment advice or an offer or solicitation to buy and/or sell securities. Every effort has been made to ensure accuracy in these commentaries at the time of publication; however, accuracy cannot be guaranteed. Market conditions may change and the manager accepts no responsibility for individual investment decisions arising from the use of or reliance on the information contained herein. Investors are expected to obtain professional investment advice.

About AGF Management Limited

Founded in 1957, AGF Management Limited (AGF) is an independent and globally diverse asset management firm. AGF brings a disciplined approach to delivering excellence in investment management through its fundamental, quantitative, alternative and high-net-worth businesses focused on providing an exceptional client experience. AGF’s suite of investment solutions extends globally to a wide range of clients, from financial advisors and individual investors to institutional investors including pension plans, corporate plans, sovereign wealth funds and endowments and foundations.

For further information, please visit AGF.com.

© 2018 AGF Management Limited. All rights reserved.

Written by

Portfolio Specialist Group

AGF Investments Inc.

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