Will Stocks Rise Forever?

Voyager 1 was launched on September 5, 1977 by Jet Propulsion Laboratory (JPL) and it’s currently 13 billion miles from Earth travelling at a speed of 38 thousand miles per hour.[1]  It’s the only man-made object in interstellar space and it recently fired up its boosters after 37 years.[2]  The original mission for Voyager was to study Jupiter and Saturn but now it appears it will travel through space forever.

The Dow Jones Industrial Average passed through 26,000 today and shows no sign of slowing down.  Is it possible we’ve entered a new galaxy for stocks where they always rise and never fall?  It feels like it, but I doubt it.  Since March 9, 2009, the Dow Jones has risen 19,557 points or 303%.

How does this run compare to previous bull markets?  The longest running bull market occurred during the ‘50s and ‘60s where the Dow rose for 15 years and soared 936%.  After the Great Depression it rose for 14 years and gained 815%.  In the ‘80s and ‘90s there were two bull markets both lasting 13 years. The ‘80s market rose 845% and the ‘90s, 816%.[3] It appears this current bull market has more fuel in the tank.

Of course, stocks can’t rise forever without a correction and gravity will eventually take over.  A bull market is always followed by a bear market.  Since 1930 there have been eight significant corrections with the worst one occurring during the Great Depression when stocks fell 83%.  The 2000 Tech Wreck brought the market down 44% and during the Great Recession it fell 50%.[4]

What can you do now as the market continues to rocket higher? Here are four suggestions.

  • Your financial plan is your command module. It controls your asset allocation and investment selection based on your financial goals.  It will help guide your decisions through bull and bear markets.
  • If you’re invested with a diversified portfolio, keep your trajectory because a buy and hold strategy is difficult to beat. Since 1926 the stock market has averaged a 10% annual return.
  • If you’ve missed this bull run and you hold a large cash position, then start to buy stocks and bonds. This can be done with a lump-sum purchase or through dollar-cost averaging.  Dollar-cost averaging is an automatic purchase of a specific dollar amount monthly.  For example, you invest $1,000 into a basket of mutual funds on the 5th of every month regardless of price.
  • You can wait for the market to correct and buy the dip. It takes fortitude to buy stocks when others are selling, but this is when you’ll get the best prices.  Warren Buffett said, “Be greedy when others are fearful.”

The market’s rise has been meteoric, and we can start to see airglow, but it doesn’t mean we’re going to fall into a black hole.  There’s no radar system to warn us of a correction so invest according to your plan, adjust as needed, and good things will happen.

“We choose to go to the moon in this decade and do the other things, not because they are easy, but because they are hard. ~ John F. Kennedy

“Houston, Tranquility Base here. The Eagle has landed.” ~ Neal A. Armstrong

Bill Parrott is the President and CEO of Parrott Wealth Management an independent, fee-only, fiduciary financial planning and investment management firm in Austin, TX.  For more information please visit www.parrottwealth.com.

January 16, 2018

Note:  Past performance is not a guarantee of future returns.  Your returns may differ than those posted in this blog and investments aren’t guaranteed.



[1] https://voyager.jpl.nasa.gov/

[2] https://voyager.jpl.nasa.gov/news/details.php?article_id=108

[3] https://www.ftportfolios.com/Common/ContentFileLoader.aspx?ContentGUID=4ecfa978-d0bb-4924-92c8-628ff9bfe12d, site accessed 1/16/18.

[4] Ibid.

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