The bull market is dead

Share markets are heading downward – the Dow Jones has started the week down another 1.65% – and the outlook isn’t great.

This could impact on many Kiwisaver investments.

Liam Dann:  The bull market is dead, the stockmarket party is over

The bull market is dead.

As fresh falls this morning take the NZX-50’s returns for 2018 below four per cent, it’s time to recognise the decade-long equity boom we’ve enjoyed is over.

For the foreseeable future we can no longer expect to see double-digit returns on our KiwiSaver funds.

Regardless of whether the major indexes keep falling into bear territory or settle for a series of smaller corrections, the bull market has lived its natural life.

The odds on reaching fresh to new highs look very slim indeed.

The NZX-50 peaked at 9375 points in September. It last traded at 8666, off 7.5 per cent from there. It is currently on track for an annual return of about 3.2 per cent.

In line with a bank term deposit rates.

The S&P 500 peaked at 2930 points in September and is currently off about 11 per cent from there.

It is now in negative territory for the year – down 3.5 per cent.

The US President suddenly seems to be pulling out all the stops to deliver some good news on the China trade war.

All that can possibly deliver is a zombie market – staggering in to the new year.

Whatever happens, the post-GFC conditions that drove double-digit market returns for almost a decade are no longer with us.

We are in the last phase of this economic cycle.

Thankfully it hasn’t been signalled as clearly as it might have been – with a recession or a major market crash.

At least not yet. And we can hope.

It happens, periodically. We just have to hope it doesn’t turn into a shit market.

14 Comments

  1. David

     /  December 18, 2018

    DXD and SPXS

  2. Duker

     /  December 18, 2018

    Trump claimed the stock market boom as his own….if it continues down over the next 2 years hes finished as far as re election goes in 2020

    • Alan Wilkinson

       /  December 18, 2018

      Be careful what you wish for, D. Your CoL is in the same economic boat as Trump.

      • Duker

         /  December 18, 2018

        ordinary Nzers arent so affected by stock market here compared to US.

        • Alan Wilkinson

           /  December 18, 2018

          Sometimes we can be more affected as we are more dependent on exports, tourism and overseas corporate investments than the US.

  3. Blazer

     /  December 18, 2018

    a major correction is due.
    The P.E ratios are ludicrous on a number of stocks.
    The NZX has quite a few penny dreadfuls that will not last.
    A world awash with unpayable debt compliments of Q.E ,thanks to rapacious,irresponsible criminals posing as legitimate businessmen.

  4. david in aus

     /  December 18, 2018

    If you want an erudite analysis of sharemarkets, have a look at: https://www.hussmanfunds.com/content/comment/

    Most asset classes are overvalued. Most of my more liquid assets are in cash and gold/gold-mining shares.

    I may be wrong but I am more concerned about the return of my capital than returns on my capital.

    • Blazer

       /  December 18, 2018

      put it under your mattress.
      Gold mining shares are very risky.Physical gold best.

      • Kitty Catkin

         /  December 18, 2018

        I remember a scam here where someone did the old real gold bricks on top, gold painted ones underneath and caught his father-in-law with it among other people, I didn’t know them but my old man did, they were Greek and that meant Orthodox. I saw them and was introducedto them, inc. the son-in-law (he and the wife were still together) and remember trying not to look as if I knew anything about them. He’d been charged by then. It was a well-known case.

      • david in aus

         /  December 18, 2018

        Gold mining shares are risky. I wouldn’t recommend them for most people unless you know what you are doing or risking a low percentage of your net worth.

        • Kitty Catkin

           /  December 18, 2018

          Hello, Green David. Yes,if the mine runs out, you’re stuffed, I suppose.

          • Kitty Catkin

             /  December 18, 2018

            Even physical gold is risky; it can go down as well as up in value.

          • david in aus

             /  December 18, 2018

            There is many more variable with gold mining. They are leveraged to the gold price. If the price of gold goes up 20%, the gold mining stock can go up 2-3 fold but if the price drops 20%, it can go bankrupt. Also depends on where the mine is: If your company is mining in Venezuela or Mongolia the government often confiscates it (Don’t invest in high-risk countries). Whether it is an explorer, royalty companies, the number of ore reserves, debt etc.

  5. oldlaker

     /  December 18, 2018

    Gold mining shares are risky but if gold prices shoot up the gains are amplified. I know one well-known investment adviser who told me he buys gold shares himself but doesn’t advise clients to do the same because he fears conservative clients would think he was flaky!