Pragmatic Capitalism

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When Do Bull Markets End?

Here’s the latest from the Richard Bernstein who is on the opposite spectrum of the John Hussman market view.  Bernstein, the former Merrill Lynch analyst who now runs his own shop, is very bullish and as always, constructs a nice argument in his latest report:

“Bull markets typically end when valuations are extreme, the Fed is tightening monetary policy, and investors are over-enthusiastic about potential equity returns. Valuations are quite attractive given that the 10-year t-note yields roughly 1.5%. Investors are very leery of equities, and equities are no longer the asset class of choice. The Fed is considering easing further, and a tightening of monetary policy seems far into the future.

The opportunity cost of fear has been very high. Both institutional and individual investors have largely missed out on a doubling of the US equity market. If this cycle continues to follow historical precedent, as it has done so far, then investors will eventually try to play catch-up, and fund flows will likely turn decidedly positive.

The bull market seems to be a very typical one and, like past cycles, is based on fear. This bull run may still be in its early stages despite being forty-one months old.”

Read his full note here.

Source: RBA

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