Running With The Bulls


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What's going on?

Last week, the S&P 500 – an index tracks the value of 500 of the biggest US public companies – set a new record for the length of time it’s consistently risen. Incredi-bull. (Tweet this.)

What does this mean?

The current “bull market” – a period in which stock prices continuously increase without experiencing a drop of 20% or more – has run since March 2009 (that’s more than 3,450 days). In that time, the value of the S&P 500 (i.e. the value of all the companies tracked by it, combined) has risen by 340% – and it hit a new record high on Friday. While this is the longest bull run on record, it’s not the biggest rise. The bull market leading up to the dotcom bubble (from the nineties until the early noughties) saw an increase of over 400%.

Some of the biggest winners of this run have been tech companies – they’ve hurtled at full speed toward the red cape and contributed over 20% of the index’s rise.

Why should I care?

For markets: Can tech stocks continue to lead the charge?

Tech stocks have been on a tear, leading some investors to worry about another bubble. Recent concerns around data privacy (at Facebook, for example) and fines levied by the European Union (on companies such as Google) might make tech companies heading the pack a tougher prospect in the future.

The bigger picture: Share buybacks and low interest rates have helped.

US companies have been splurging on buying back their own shares over the last year, reducing the number available on the stock market. The remaining shares usually rise in value, helping push the stock market higher. Additionally, low interest rates over most of the last decade likely encouraged investors to buy more stocks – since money in the bank wasn’t earning much. As interest rates begin to rise, investors may take money out of stocks and put it elsewhere (like into new bonds which’ll pay more interest).

Originally posted as part of the Finimize daily email.

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