The Life Expectancy of a Bull Market
The recent long period of low volatility in US capital markets was not an anomaly. Stability in the fears and anxieties that drive the flow of capital is the rule rather than the exception. Empirically, a stock-market advance is much more likely to persist than to be reversed. The residual life expectancy of a bull market does not diminish with age. Last month's selloff was not accompanied by material changes in the most reliable early-warning indicators of US growth and inflation. Business confidence and consumer confidence remain very high. Past stock-market plunges, especially the deepest, have been reversed within a few months. The recent turbulence is likely to signify a mere interruption in the ongoing bull market, not its end.
R. DAVID RANSON is president and director of research at HCWE & Co., an independent investment research firm now located in Portland, Oregon. Originally known as Wainwright Economics, the economic-investment research arm of H.C. Wainwright & Company of Boston, Massachusetts, became an independent operation in 1978 and has since been renamed HCWE. Prior to becoming a general partner of H.C. Wainwright, Mr. Ranson joined Director George P. Shultz’s personal staff at the Office of Management and Budget, served as an assistant to then Treasury Secretary William E. Simon, and taught economics at the University of Chicago Booth Graduate School of Business. He is a Fellow of the Institute for Applied Economics, Global Health and Business Enterprise at Johns Hopkins University in Baltimore. Ranson holds M.A. and B.Sc. degrees from Queen’s College, Oxford, and an M.B.A. in finance and Ph.D. in business economics from the University of Chicago.
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