10 Years of the Bull Market Run

10 Years of the Bull Market Run

The financial system had nearly collapsed. The deepest recession in decades was devouring over 700,000 jobs a month. Roughly $13 trillion in stock market wealth, slowly rebuilt since the dot-com bust, had again been incinerated.  It was March 2009. And it was one of the best times in a generation to buy stocks.

On March 9, 2009, the day the bull market was born, the stock market, like the economy, was in deep, seemingly existential distress. The S&P 500 was down 57 percent from its 2007 peak.  Compounding the pain was the nationwide collapse in home prices, which landed a direct hit on most households’ greatest source of wealth.

The one-two punch destroyed the finances of millions of families. Between 2007 and 2010, the median wealth of a household in the United States dropped 44 percent, knocked below 1969 levels.

Every crash has a bottom, though, and in March 2009, the Federal Reserve announced that it would spend $1 trillion in newly created dollars on government and mortgage bonds to push interest rates lower. It was the dawn of “quantitative easing” — and, it would turn out, a new bull market. The S&P 500 rose 8.5 percent that month, its best monthly performance in more than six years.

A decade later, the bull market that began back then ranks among the great rallies in stock-market history. The 305 percent surge in the S&P 500 is the index’s second-best run ever.

According to The New York Times, the rise has generated more than $30 trillion in wealth. Adjusted for inflation, that is the most created during any bull run on record, edging out the $25 trillion in gains during the epic streak from December 1987 to March 2000, which ended with the bursting of the dot-com bubble, according to Federal Reserve data.

But compared with Americans’ attitudes during that earlier climb, reactions to the latest rally are downright subdued. There has been no frenzy for stock trading. Nobody is quitting an accounting, advertising, or waitressing job to concentrate on day trading.

The psychological and financial damage inflicted by the 2008 financial crisis and the ensuing Great Recession continue to weigh heavily. Fewer people are invested in stocks than before that meltdown, and many of them are wary of taking their gains for granted. That caution could last for decades.

“This was probably the most disliked or most suspected rally that we’ve ever had in the stock market,” said Charles Geisst, a professor at Manhattan College who has studied the history of financial markets.

In 2007, the wealthiest 10 percent of American families owned 81 percent of the nation’s household stock market wealth, according Ed Wolff, a professor of economics at New York University who studies the distribution of wealth in the United States. By 2016, they owned 84 percent, he said.

The recovery in the stock market made those families even richer, increasing their net worth by double-digit percentages. Median American family wealth, meanwhile, dropped 34 percent.

In the past, such episodes of wealth destruction cast long shadows. For much of the 20th century, the financial habits of the American public were heavily influenced by memories of the Great Depression.

Gallup survey data shows that in the last decade, an average of 38 percent of Americans under the age of 35 have money invested in the stock market. That compares with 52 percent before the crisis.

In 2017, 43 percent of all the money in American stock market funds was in index funds. Back in 2007, only 19 percent of stock market assets were in these passive strategies, a style of investing that acknowledges that, for most people, trying to beat the market through savvy trading is a mug’s game.

Americans also appear to be less willing than in previous booms to let the rise in stock market wealth on paper lead to a surge in spending. Family savings rates have stayed stubbornly high by historical standards.

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