The end of the bull market

The end of the bull market

The end of the bull market New York advisor Josh Brown, known to many as The Reformed Broker, wrote a blog post Thursday that presents some damning evidence that the seven-year bull market is coming to an end.

“Chasing the stocks with the highest price appreciation over the last 12 months (momentum) in a market selling at one of the highest historic valuations is a phenomenon we tend to see toward the latter stages of a bull market,” wrote Brown. “So $31 billion out of index products and $23 billion into active ones. This is a break from the script, for sure.”

Canadian advisors aren’t so sure.

“Most of my people have equity weightings with two-thirds outside of Canada,” said Assante Wealth Management advisor Glen Rankin. “I think probably we’re going to see things get a little soft here. We might see a correction but I don’t think we’re going to see a bear market.”

According to data from Bank of America Merrill Lynch portfolio manager Savita Subramanian, when it comes to U.S. equities, growth factors are outperforming value factors by more than four percentage points. It’s never a good sign when value stocks trail growth stocks because it’s a signal profits are decelerating. Conversely, when value stocks outperform value stocks, higher profits lie ahead.

Brown’s figures from above are the most recent quarterly figures from BlackRock in the U.S. With the S&P 500 basically flat for the last eight months investors are desperate to find something moving higher.

But that doesn’t necessarily mean the bull market has come to an end.

Rankin’s thinking is hardly pollyanna having suffered like most advisors during the 2008 correction. He’s worked hard to position his clients against the next big one.
 “We pretty much have got ourselves in a position now where everything is automatically rebalanced and profits are being taken when things are going up so you’re defended when things go down,” said Rankin. “One thing it did do [2008] is it retested people’s risk profiles because a lot of time clients think they have higher risk tolerances then they do. People’s risk tolerances did go down as a result.”

The Nova Scotia advisor’s experiences from seven years ago have left an indelible impression on him. Not one to predict the direction of markets, he still believes equities are an important part of a diversified portfolio.

So, in Rankin’s opinion, the bull might be wounded, but it’s probably not dead.
 
4 Comments
  • Peter 2015-07-17 10:04:06 AM
    These comment and "professional opinions" are nothing but hogwash!
    No one has a crystal ball and no one knows what will happen even next week, never mind next year.
    I am so tired of reading these predictions from the these so-called experts.
    If these people know how the markets will react next week, they would all be millionaires sitting on the beach in front of their villas!
    Face it .... stock market volatility is here to stay forever due to globalization and global events that are beyond our control.
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  • Anonymous 2015-07-17 1:28:17 PM
    Well said, Peter!
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  • Howard Kitchen 2015-07-17 2:32:53 PM
    Yes I agree with Peter, however one fact we do know that over the long term markets/stocks/values will continue to increase. Since I started in this business in the 1980's the markets have gone up six fold. lots of downs but still up. and it will indeed make the longer term investor rich! Until capitalism changes equities is the way to wealth.
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