For want of sounding like one of Donald Trump’s declarations on social media, the US stock market at the moment is experiencing one of the ‘longest bull runs ever’, triggered by a number of events.

First of all, by the man himself – President Trump and his tentative new trade deal with Mexico on August 28, pushed the S&P 500, Dow Jones Industrial Average (DJIA) index and the Nasdaq even higher (the later over the 8,000 mark for the first time).

The rally built on strong gains last week, as the US Federal Reserve Chairman, Jerome Powell signaled that the US economy was in a strong position and that rate rises in the US were set to continue.
The US bull run in numbers

The US bull run in numbers

The current US bull market started on March 9 2009, based on closing prices for the S&P 500. On August 22 2018, it clocked up 3,543 days, taking it beyond the bull market of the 1990s which ran from October 1990 to March 2000. Since then the index has more than quadrupled in value.

Source: Hargreaves Lansdown

So where does this leave investors?

Despite all this bullish-ness surrounding the US stock market, investors remain worried due to the ongoing tensions with the US and China, also a lot of the record highs have been propelled by tech stocks like Amazon, Microsoft and Apple. There could be a whiff of ‘over-valuation’ in the air, or dotcom crash (again).

If investors are worried about the US, perhaps they could re-position their portfolios towards Europe, according to analysis at Schroders.

German stocks have returned nearly 250% over the same period and UK stocks have made just over 200%, according to MSCI indices. Chinese and Japanese stock markets have registered returns of nearly 200%.

Quantitative easing (QE), which is effectively central banks pumping money directly into the financial system by way of asset purchases (mainly bonds), has driven down the cost of financing. It has kept lenders lending and corporations spending. It has inflated the prices of many assets, from stock markets to houses to classic cars.

The UK stock market has also been on a strong since 2009, though its bull run has been broken by a bear market in 2015 and into 2016, though this was relatively short-lived and perhaps is better viewed as a major correction.

Source: Thomson Reuters Datastream

Laith Khalaf, senior analyst, Hargreaves Lansdown: “Many question whether this exceptional period for the US stock market is going to end in tears, though the very fact this issue is so widely raised suggests we are not in the throes of the irrational exuberance of the late 1990s.

“UK investors in US stocks have done particularly well from a combination of strong stock market returns and a weakening of the pound against the dollar. Returns since the financial crisis have been robust from the UK stock market too, though not to the same degree as in the US, and with more choppiness.

“Trying to time the market is notoriously difficult, and is just as likely to leave you out of pocket as quids in. Investors who are concerned about market valuations can take the simple step of setting up a monthly investment plan, which still keeps their savings ticking over while taking advantage of any market dips.”

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Sabuhi Gard is an investment writer for Incisive Works

Further reading on this topic:

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