Do Bull Markets Die of Old Age?


Back in elementary school, we learned “what goes up must come down.” So you may be wondering: When is the current bull (up) market going to run out of steam? It’s already been going for almost a decade, with a few bumps late last year—which makes it, by some calculations, the longest-running bull market in history.

It’s a good question. History suggests that economic cycles are real, and good times don't last forever. The roaring 20s were followed by The Depression. The dot-com and housing bubbles were followed by the Great Recession. Stocks generally follow these broader trends, and those long bull markets eventually turned into bear (or down) markets. (The generally accepted definition of a bear market is a drop of 20 percent from previous highs.)

So what kills bull markets? Is it old age?

Think about it like this: If bull markets, like people, have a life expectancy, then they’d generally all die around the same time. But a glance at classic bull markets in history doesn't suggest this.

Yardeni Research counts 10 bull markets since 1948, each lasting around five years on average. But one ran only 784 days, or just over two years, and the longest, according to their calculations, lived to the ripe old age of 12. That’s a pretty wide range.

Another analysis identified 14 bull markets markets since 1925 with a mean lifetime of 55 months. Again, life expectancy wasn’t affected by age.

If old age doesn’t kill bull markets, what does?

Some experts say “uncertainty” is what turns bulls to bears. And plenty of analysts argue that down markets often coincide with economic downturns. Sometimes a massive technology shift that dramatically alters productivity and efficiency calculations—like the invention of the Internet—can also contribute to a drop in stock prices. This goes to show the futility of trying to predict the end of a bull market; any number of factors could result in a short-term pullback.

Emphasis on “short-term.” In the end, if you look at the full, 90-plus year history of the stock market, you could conclude that bull markets never really die at all. They just hibernate for a few years. Then, like a bear in spring, they wake up and charge ahead again.

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