Wall Street is marking the longest ever period of bullish investor sentiment, reflected in the benchmark S&P 500. But the underlying definition of a bull-market run is arbitrary, experts say.
The S&P 500 index experienced its 3,453rd straight session without a drop of 20 percent from its peak, matching one possible definition of an uninterrupted bull market.
While financial experts are well aware of the durability of the current stock market cycle, the record is "news more to Main Street than to Wall Street," B. Riley FBR Chief Market Strategist Art Hogan told AFP news agency.
'Just an invention'
The theory behind the record is that stocks only exit the bull market, if they fall at least 20 percent below the previous peak.
But while bulls and bears are very much in the psyche of Wall Street traders, there is no official authority on the 20 percent rule; it seems impossible to state who "invented" that rule.
What can't be questioned, though, is that bullish investor sentiment has been going on for years in the US. The current protracted period actually began in March 2009 amid emergency steps taken by the Federal Reserve, which set ultra-low interest rates and sought to spur investment with billions of dollars in bond purchases in a program known as quantitative easing (QE).
S&P stocks got another shot of support in late 2017 when US President Donald Trump and his Republicans succeeded in pushing through an overhaul of the tax code, seeing the tax rate on corporate profit fall from 35 percent to just 21 percent.
That led to huge gains in companies' earnings, with firms listed in the S&P 500 reporting a near 25 percent jump in second-quarter profits per share in 2018 year on year.
What does the future look like?
Key US economic indicators have been solid as unemployment hit an 18-year low of 3.8 percent in May (before rising slightly).
Analysts have recently pointed to a variety of potential threats to the current bull market, including a global economic slowdown prompted by the myriad Trump-triggered trade conflicts.
Another worry is that the sudden spike in inflation will see the Fed accelerating its pace of interest rate hikes, further boosting the greenback and hitting emergency markets holding debt denominated in the US currency.
hg/jd (AFP, Reuters)