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Visualizing the Longest Bull Markets of the Modern Era

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Visualizing the Longest Bull Markets of the Modern Era

Visualizing the Longest Bull Markets of the Modern Era

The Chart of the Week is a weekly Visual Capitalist feature on Fridays.

During the longest bull market in modern history, the S&P 500 surged a whopping 418% over the 9.5 years between November 1990 and March 2000.

This was during the famous economic expansion that took place during the Clinton era, in which job growth was robust, oil prices fell, stocks soared, and making money was as easy as throwing it in the stock market.

In mere months, this famed bull market may lose its title as the “longest” in the modern era.

That’s because, according to data and analysis from LDL Research, the current bull market will take over the claim to fame in late August 2018.

Ranking the Bulls

In today’s chart, we show every bull market since WWII, including the top six which are covered in more detail:

RankBull MarketDatesMonthsS&P 500 ReturnAnnualized Return
1Great Expansion'90-'00114418%19.0%
2Post-Crisis Bull Run'09-'18*112*302%16.7%
3Post-War Boom'49-'5686267%20.0%
4That '70s Growth'74-'8074126%14.1%
5Reagan Era'82-'8760229%26.7%
6The Hot Aughts'02-'0760101%15.0%

*Still in progress.

By looking at duration, total rate of return, and annualized rate of return, it really gives a sense of how these bull markets compare.

The current run, which will soon become the longest, didn’t have the same level of intensity as other high-ranking bull markets. Critics would say that it was artificially propped up by ultra-low rates, QE, and other government actions that will make the market ultimately less robust heading forward.

Regardless, the current run ranks in fourth place among the markets above in terms of annualized return.

What Ended Each Bull?

The market psychology behind bull and bear markets can be fascinating.

Below we look at the events credited with “ending” each bull market – though of course, it is actually the actions of investors (buying or selling) that ultimately dictates market direction.

1. The Great Expansion
The bull run lasted 9.5 years, ultimately capitulating when the Dotcom Bubble burst. From the span of June 1999 and May 2000, the Fed raised interest rates six times to try and get a “soft landing”. Market uncertainty was worsened by the 9/11 attacks that occurred the year after.

2. The Post-Crisis Bull Run
Still ongoing…

3. The Post-War Boom
This boom occurred after WWII, and it ended in 1956. Some of the sources we looked at credited the launch of Sputnik, Eisenhower’s heart attack, and the Hungarian Revolution as possible sources of market fear.

4. That ’70s Growth
The Iranian Revolution, the 1979 Energy Crisis, and the return of double-digit inflation were the factors blamed for the end of this bull.

5. Reagan Era
This bull market had the highest annualized return at 26.7%, but the party came to an end on Black Monday in 1987 – one of the most infamous market crashes ever. Some of the causes cited for the crash: program trading, overvaluation, illiquidity and market psychology.

6. The Hot Aughts
Stocks did decently well during the era of cheap credit and rising housing prices. However, the Financial Crisis put an end to this growth, and would cut the DJIA from 14,000 points to below 6,600 points.

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Markets

Beyond Big Names: The Case for Small- and Mid-Cap Stocks

Small- and mid-cap stocks have historically outperformed large caps. What are the opportunities and risks to consider?

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A line chart showing the historical return performance of small-, mid-, and large-cap stocks.

 

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The following content is sponsored by New York Life Investments
An infographic comparing low-, mid-, and large-cap stocks, including an area graph showing historical returns, a bubble chart showing how much $100 would be worth over 35 years, a horizontal bar graph showing annualized volatility, and a line graph showing relative forward price-to-earnings ratios, that together show that mid-cap stocks present a compelling investment opportunity.

Beyond Big Names: The Case for Small- and Mid-Cap Stocks

Over the last 35 years, small- and mid-cap stocks have outperformed large caps, making them an attractive choice for investors.

According to data from Yahoo Finance, from February 1989 to February 2024, large-cap stocks returned +1,664% versus +2,062% for small caps and +3,176% for mid caps.  

This graphic, sponsored by New York Life Investments, explores their return potential along with the risks to consider.

Higher Historical Returns

If you made a $100 investment in baskets of small-, mid-, and large-cap stocks in February 1989, what would each grouping be worth today?

Small CapsMid CapsLarge Caps
Starting value (February 1989)$100$100$100
Ending value (February 2024)$2,162$3,276$1,764

Source: Yahoo Finance (2024). Small caps, mid caps, and large caps are represented by the S&P 600, S&P 400, and S&P 500 respectively.

Mid caps delivered the strongest performance since 1989, generating 86% more than large caps.

This superior historical track record is likely the result of the unique position mid-cap companies find themselves in. Mid-cap firms have generally successfully navigated early stage growth and are typically well-funded relative to small caps. And yet they are more dynamic and nimble than large-cap companies, allowing them to respond quicker to the market cycle.

Small caps also outperformed over this timeframe. They earned 23% more than large caps. 

Higher Volatility

However, higher historical returns of small- and mid-cap stocks came with increased risk. They both endured greater volatility than large caps. 

Small CapsMid CapsLarge Caps
Total Volatility18.9%17.4%14.8%

Source: Yahoo Finance (2024). Small caps, mid caps, and large caps are represented by the S&P 600, S&P 400, and S&P 500 respectively.

Small-cap companies are typically earlier in their life cycle and tend to have thinner financial cushions to withstand periods of loss relative to large caps. As a result, they are usually the most volatile group followed by mid caps. Large-cap companies, as more mature and established players, exhibit the most stability in their stock prices.

Investing in small caps and mid caps requires a higher risk tolerance to withstand their price swings. For investors with longer time horizons who are capable of enduring higher risk, current market pricing strengthens the case for stocks of smaller companies.

Attractive Valuations

Large-cap stocks have historically high valuations, with their forward price-to-earnings ratio (P/E ratio) trading above their 10-year average, according to analysis conducted by FactSet.

Conversely, the forward P/E ratios of small- and mid-cap stocks seem to be presenting a compelling entry point. 

Small Caps/Large CapsMid Caps/Large Caps
Relative Forward P/E Ratios0.710.75
Discount29%25%

Source: Yardeni Research (2024). Small caps, mid caps, and large caps are represented by the S&P 600, S&P 400, and S&P 500 respectively.

Looking at both groups’ relative forward P/E ratios (small-cap P/E ratio divided by large-cap P/E ratio, and mid-cap P/E ratio divided by large-cap P/E ratio), small and mid caps are trading at their steepest discounts versus large caps since the early 2000s.

Discovering Small- and Mid-Cap Stocks

Growth-oriented investors looking to add equity exposure could consider incorporating small and mid caps into their portfolios.

With superior historical returns and relatively attractive valuations, small- and mid-cap stocks present a compelling opportunity for investors capable of tolerating greater volatility.

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