As many of you did, I watched the last several days’ television coverage of the recent free-climb of El Capitan’s 3,000 foot Dawn Wall. The two climbers were the first to climb the wall using only their hands and feet, although ropes were used to break their falls. The climb took 19 days and they celebrated their accomplishment with champagne and much needed showers. As I have aged, I have developed a fear of heights, so much so that I could not watch any scenes looking down on the climbers showing the distant bottom of the cliff. Doing so turns my stomach and takes all energy out of my legs; indeed I am a real basket case when it comes to falling. Don’t ask me why I climbed Pikes Peak in 2013!
After 2,122 days of this bull market with stocks frequently setting new all-time highs, investors naturally start looking down. Today, you might be focusing on our 177% increase from the March 2009 bottom in five years and nine months, recognizing that we now have much further to fall. Like the climbers though, we need to focus on looking up at where we are going and keep following the plan laid out to accomplish our goal. The climbers methodically developed a plan for success, then executed it carefully. The result, an accomplishment we might find terrifying, they found to be exhilarating and fulfilling.
For years, we have illustrated a Real Total Return Graph of the Standard & Poor’s Industrial Index. Using the chart, we have identified mega-bulls of the past century beginning in 1932 and 1982. Being a strong believer in these long-term cycles, I contend we bottomed in 2009 and we will never see that level again, barring a world calamity that threatens our very existence. Nevertheless, in the previous two bull markets, there were serious interruptions after five years. In 1937 a serious recession began after the market had risen 400%. In 1987, after rising 236% in five years, we had “Black Monday” when the market collapsed 22% in one day, ending in a 35% overall bear market lasting less than four months. Both events were dramatic and in this current bull we are beyond five years, so one thinks of looking down. As you can see in the above numbers though, even though we are nearing six years in this bull market, we have not risen as quickly as had the other two bulls, indicating we may have some good times ahead still.
More important for the investor than the year being a good one, is to make sure a well thought out financial plan is being followed carefully. If you are, then do not look down at the wall of worry we have been climbing. Your plan has ropes to keep you from failing, even in a 35% bear market. If you do not have a plan in which you have confidence, then please get with your financial consultant.
Like the climbers, we can all use adding some exhilaration and fulfillment to our investing lives and retirement. Looking up, we expect this long-range cycle to perhaps last another twelve years, certainly with some hurdles along the way. If this bull rises as much as did the bull market of 1982-2000, we could eventually rise to a Dow index as high as 100,000. Impossible? So was climbing El Capitan.
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