CHICAGO Jan 6 What are the odds that the U.S.
stock market's bull run will continue?
Despite last year's record rise - the S&P 500 and Dow
Jones industrial average both closed at all-time highs -
it does not always follow that one good year will be succeeded
by another. The stock market is often roiled by irrational
fears, bubblicious greed and a constantly boiling pot of
Yet many pundits predict that corporate earnings and the
global economy will continue to expand, so stocks may have
another good year. Just don't invest thinking you will see a
repeat of the 26 percent return the S&P 500 Index posted last
A little historical perspective on 2013 may be in order. The
most comparable year was 2003, when the S&P Index returned 26
percent. Going back further, you would have to revisit the nifty
'90s to see better returns: big stocks were up nearly 27 percent
in 1998; 31 percent in 1997 and 34 percent in 1995.
What did those years have in common? Relatively low
inflation and consistent economic and employment growth. If you
see these trends continuing in 2014, odds are your portfolio
A continuing bull market will favor investors with
broad-based exposure to stocks in the United States abroad. One
big-basket fund for global growth is the Vanguard Total World
Stock Index ETF, which holds some 5,000 stocks.
Represented in the Vanguard portfolio are mega-caps such as
Apple Inc, ExxonMobil Corp and Google Inc
. The fund was up nearly 23 percent last year and
charges 0.19 percent annually for expenses.
For those who are cautious about investing in U.S. stocks
after a five-year advance - which is natural - you have to cast
the widest possible net. In that spirit, consider the SPDR S&P
World ex-U.S. ETF, which invests in nearly every
developed country save the United States.
The SPDR fund was up about 19 percent last year and charges
0.34 percent in annual expenses. Its portfolio holds companies
like Nestle SA, Samsung Electronics Co Ltd
and HSBC Holdings PLC.
FLY IN THE OINTMENT
One nagging concern harbored by market skeptics like me is
that the rally could be interrupted at any moment by some
unforeseen gremlin. Rising interest rates could be a negative
influence. Since the stock market hates uncertainty, this is
always a worry.
Again, history provides some guidance. The average bull
market lasts for 61 months, based on market data going back to
1932, according to David Larrabee, writing for the CFA
Institute's "Enterprising Investor" blog, an organization
representing chartered financial analysts.
The current bull market - stretching back to March 2009 - is
right around that average duration. Does that mean that when the
rally hits a half-decade it automatically hits the brakes? Not
For one thing, some rallies have gone on much longer than
the current one. The largest sustained gains since the onset of
the Great Depression were from December 1987 through March 2000,
netting a 582 percent return over 12 years, according to
Larrabee. (A distant second in bull surges was from June 1949
through August 1956. This post-war rally saw a 267 percent
run-up over seven years.)
Another positive lesson from history is that most of these
barn-burning rallies came after huge, gut-wrenching declines.
Stocks rebounded after investors went through major bouts of
discouragement - the "Black Monday" crash of 1987; the dot-com
bust of 2000; World War Two; and the crash of 1929 and
subsequent Great Depression. While it can be argued that we are
still suffering a low-employment hangover from 2008, the market
may still move ahead in a marginally improving economic
The most important insight is that you can rarely predict
the start or the end of rallies. Who would have thought that
some of the biggest returns would have been recorded in the
There is only one guarantee in all of this rearview
mirroring: You can't reap stock returns if you are not invested
or are waiting for "confirmation" of market signals. Some of the
best periods to invest are when the general business news is
negative - or just plain boring.