Co-Authored by Michelle Kangas & Dr. Bryan Taylor
Although few people may realize it, we could be living through the greatest bull market in American history. Only three bull markets during the past 225 years have achieved a 400% increase in stock prices. Between 1921 and 1929, the S&P Composite rose 409%, between 1974 and 1987, the S&P 500 rose 442.5% and between 1990 and 2000, the S&P 500 rose by 418.6%.
Figure 1. S&P Composite, 1921 to 1932
During the 1921 to 1929 bull market, the S&P Composite rose by 409%. Standard Statistics had just introduced its Composite to compete with the more popular Dow Jones and New York Times Indices and today it is the benchmark for the stock market. The 1921-1929 bull market rose during a period of low inflation, rising 399% in real terms making it the strongest of the four SuperBull Markets. However, it was followed by the longest and deepest bear market in American history, declining by 86% between 1929 and 1932.
Figure 2. S&P 500 1974 to 1988
The bull market from 1974 to 1987 was the strongest in history with the S&P 500 rising by 442.5%; however, this bull market occurred in the middle of the worst inflation in American history. After inflation, the S&P 500 rose by only 147% between 1974 and 1987. As Figure 2 shows, most of this increase occurred between 1982 and 1987 before the stock market crash of 1987 put an end to a 13-year bull market.
Figure 3. S&P 500, 1990 to 2002
The last of the three bull markets occurred between 1990 and 2000 when the internet bubble drove the S&P 500 up over 418%. The gains in the NASDAQ Composite were even greater. The NASDAQ Composite rose by 518% between 1990 and 1998, slipped into a 29% bear market in 1998, then rose another 255% before topping out at over 5000, up over 1400% between 1990 and 2000. The NASDAQ Composite then declined by over 77%, not as bad as the S&P Composite’s decline between 1929 and 1932, but close. After inflation, the market rose by 311%.
Figure 4. S&P 500, 2009 to 2019
The current bull market began on March 9, 2009, over ten years ago and has already risen over 370%. The S&P 500 almost suffered a bear market at the end of 2018, though it stopped its decline at 19.78% and has bounced back in 2019. The United States, Australia, New Zealand and the United Kingdom were the only major markets in the world that avoided a bear market in the 2010s. The market would need to rise to 3382.65 to achieve the 400% bull market which has only occurred three times in the past. With the S&P 500 currently around 3200, this would require only a 5% increase to achieve a 400% increase. To beat the 1974-1987 bull market in nominal terms, the S&P 500 would need to rise to 3675 or about 15%. At this point, the stock market’s capitalization would be twice GDP. To achieve a 400% increase after inflation, the S&P 500 would need to rise to 4030 or about 26%.
There have been two pauses in the current bull market. The first occurred in 2015-2016 and the second in 2017-2018. Many analysts feel that we have just broken out of the second correction in this bull market and are heading to new highs in 2020. The S&P 500 is already up 35% from its December 2018 lows and continues to move up. How much higher the market moves before it finally meets the dreaded bear remains to be seen, but we predict that by the time this bull market ends, it will have been the greatest bull market in the past 225 years of American history.