Wall Street's Bull Market Is Knocking on the Door of Unwanted History

The current bull market, which began in June 2023, has been extended due to several factors that have contributed to its longevity. These factors include low inflation and stable prices, technological innovation, consumerism and credit availability, policy shifts, and investor psychology. However, as the market approaches its third anniversary, investors are beginning to question whether this bull market is sustainable or if it is on the brink of an unwanted historical event.



Historical data suggests that bull markets typically last around 3.8 years on average, with the longest bull market in history running for 11 years from 2009 to 2020. The current bull market, which has lasted for over two years, is already longer than the average duration. However, as the market approaches its third anniversary, investors are becoming increasingly concerned about the potential for a correction or even a bear market.



Several indicators suggest a potential shift in market behavior, signaling a possible slowdown or correction in the bull market. The CBOE Volatility Index (VIX), which measures market volatility and fear, has been relatively low throughout the bull market. However, it has started to tick up in recent months, indicating increased uncertainty and potential fear among investors. Additionally, the NYSE Advance-Decline Ratio, which compares the number of advancing stocks to declining stocks, has been trending lower, suggesting a decrease in market breadth and a potential slowdown in the bull market. The Federal Reserve Bank Kansas Financial Stress Index, which measures financial stress in the market, has been trending higher, indicating increased stress and potential fear among investors.

Furthermore, the S&P 500's performance has been driven by a narrow group of stocks, with the top 5 companies accounting for around 25% of the index's total market capitalization. This concentration has raised concerns about market breadth and sustainability. As the market approaches its third anniversary, investors are beginning to question whether this concentration is a sign of overvaluation and a potential correction in the market.



In conclusion, the current bull market has been extended due to several factors that have contributed to its longevity. However, as the market approaches its third anniversary, investors are becoming increasingly concerned about the potential for a correction or even a bear market. Several indicators suggest a potential shift in market behavior, signaling a possible slowdown or correction in the bull market. Investors should closely monitor these indicators and adjust their strategies accordingly to navigate potential market shifts.