The current bull market has had a barn storming run and is currently in its 8th year. Typically, when bull market runs get this long and have racked up positive returns of over 200% during this time, investors start to question how much longer the bull has to run.
I recently came across a great article which aims to show where the markets currently are in terms of the investment cycle. The evidence currently points to the markets being in the latter end of the mid-staged bull market and about to enter the peak of the bull.
When markets normally are about to enter its peak stages, we see heavy sector rotation as people get out of value and defensive stocks and clammer into growth and momentum plays. This is exactly what we have been seeing over the past month or so.
Just have a look at the image below to see how investment styles, fundamentals, valuations and phycological factors can point to where we currently are in the investment cycle.
The natural question from being in the late phase of a bull market is this, ‘ when will the next bear market start?’ As with most timing factors in the stock market, no one really knows the answer to this. But predictions can be made by looking at bear market checklists.
Have a look at the image below to see the bear market checklist produced by GVQ Investment Management. Click on it to enlarge and make more clear.
The various criteria currently point to very little probability of there being a bear market at present as only 3.5 out of 18 sell signals being ticked at present. In contrast, when looking at the period right before the dot-com bubble and financial crises, 17.5 and 13 sell signals were flashing red.