WHEN WILL THE CURRENT BULL MARKET COME TO AN END?
By Philip Howe (Raymond James)
When stock markets go up it is described as a Bull market, when they fall it is a Bear market. We
have been experiencing a Bull market now for over ten years. History tells us this cannot continue indefifinitely, so the question is are we at the top of the market or do we have further to run?
in the markets driven by the technology boom.The bust that followed was caused by an over inflflating of prices with expectations of future earnings far in advance of reality.
In 2008/9 we faced the Great Financial Crisis, a completely different reason for markets to tumble but the outcome in terms of stock market returns was largely the same.
Since then markets have risen, not completely in a straight line, but generally if you stayed invested you made money.
One of the most common metrics used for valuing stock markets is what is known as the PE ratio.This is a ratio of Price to Earnings and simply put the higher the number the more expensive it is.A high number in itself is not a bad thing but when an entire market reaches historically high levels then it is a good time to show caution.
Take the UK stock market, in 1999 the PE ratio was in the high 20s.The historic average is closer to mid-teens so one can see that the market in total was expensive.What is known as a “bubble” had formed.
Today the PE ratio of the UK stock market is a lot closer to its long term average at just over 15.
Whilst many would say that economic growth has been positive for a long time it is also fair to say that the rate of growth has not been as dynamic as previous economic cycles. This means that economies, and stock markets, have taken longer to recover and then grow than in previous cycles. We are still in an environment today of low growth, low inflflation and low interest rates.This economic environment has supported stock markets and could continue to do so for a while yet.
   Just because markets have been going up for a long time this does not mean they have to fall soon. A catalyst is required to bring about a downturn in
markets and this is normally linked to either an overheating in prices, or a recession.
In 1999 we experienced a rapid rise
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