Is This Bull For Real?
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Transcript below:
Speaker 1 (00:07):
Welcome back to 30 Minute Money, the podcast that delivers action-oriented smart money ideas and little bite-sized pieces. I'm Scott Fitzgerald in ROC Vox Studio in the suburbs of Rochester, New York. Joining me today in studio is Steve Wershing from Focused Wealth Advisors. Hey
Speaker 2 (00:23):
Scott,
Speaker 1 (00:23):
My good snappy dresser friend. , how are you doing today?
Speaker 2 (00:27):
I'm doing great. How are you?
Speaker 1 (00:28):
I'm doing well. I'm always excited when we, uh, have some studio time to talk about these pressing financial issues. Me
Speaker 2 (00:34):
Too.
Speaker 1 (00:35):
And things that I can now learn about .
Speaker 2 (00:37):
We like talking money.
Speaker 1 (00:38):
This is a great, this is a great, uh, episode for me because this kind of, I've always wanted to talk about this be just because it's one of those things, you know, bull market, bear market, you hear those, those terms, right. Thrown around all the time. There's even a big bull in Wall Street, like a big That's right. You know. Um, so I'm interested in this and, and today is, is is this bull for real ?
Speaker 2 (01:03):
That's right. I see.
Speaker 1 (01:03):
As it did there. See that?
Speaker 2 (01:05):
That's right. It's all just bull .
Speaker 1 (01:08):
So what
Speaker 2 (01:08):
Is it? Well, so the, the, um, the mar the, there was, there have been headlines lately because, uh, we are back in a bull market. So at all of the new services saying, Hey, the bull has has, has reappeared. And, um, and a lot of people are questioning, well, is this thing for real? I mean, is this just a little bubble? Is this just a little, a little temporary thing? Is this for real? And so I thought it would be good to talk about that mm-hmm. , because many people out there may be wondering the same thing as you. It's like, what's all this? What's all this? I hear about a bull market. Yeah. And, uh, what about it being real or not? So, so let's, let's start with what, what, what is a bull market? What's a bear market? Mm-hmm. , in simple terms, a bull market is one that's rising, and a bear market is one that's declining. But specifically a bull market is when the stock market has risen 20% from its low point. And a bear market is a market where the, um, where the indexes have declined 20% from their high. So the first, the first, an the first answer to the question is, of course, yes, the bull market is for real because it's just a calculation. It's just math. So we are now more than 20% up off the most recent bottom.
Speaker 1 (02:22):
Huh. I always thought it was more complicated than that.
Speaker 2 (02:25):
Not really. Nope. That's
Speaker 1 (02:26):
Interesting.
Speaker 2 (02:27):
You know, I mean, it, it brings the, the conversation around to what we'll talk about in a little bit, which is where's it going from here? How long will this bull last? But is it a bull market? Sure. It's a bull market because it's now climbed more than 20% from its low.
Speaker 1 (02:42):
Okay. So now is that technically better? Is it bull market better than a bear market, or am I jumping ahead?
Speaker 2 (02:49):
Well, no, it just means that things are going up. So that's, that's good. That's good. That's good. Yeah. We like that. Yeah. That's, now, now you know, it, it has to, it has to go that 20% because the market never in a straight line, you know? Right. It's always jittering up and down and up and down. And so you couldn't call every time the market goes up a little bit a bull market because then, you know, it has to be trending consistently. Yeah. You'd have to, you'd have a bull market or a bear market like every other week. But, you know, so that's why there's that threshold. It you, you can, you can have things going up during a bear market. You can have things going down during a bull market. And so is it the trend that's kind of what those labels are going, going for, and that's why they have that 20% threshold.
(03:29):
Now, to give it a little context, um, what that means is that we are coming out of a bear market because if it's just now a bull market again, that means it must have been declining before. And, you know, for all of us who lived through 2022, yes, it went down , it went down pretty dramatically in 2022. Um, that decline began, uh, on, uh, uh, in January of 2022. But it didn't actually become a bear market until June 12th, 2022, because that's when it declined 20%. The, the, that's when it hit that 20% mark, and it continued down and it turned and started going back up again on October 12th, 2022. But it was not a bull until just last week. It crossed that 20% threshold. So, um, it climbed from October, not evenly, of course it goes up and it goes down, but it gradually made its way up from October of last year until June 8th of this year. And, uh, on June 8th, it crossed over that magic 20% threshold and became a bull market again.
(04:39):
So the big question of course, is, okay, well it's a bull market now. Great. How long is it gonna be a bull market? How long is it gonna go? Right, exactly. So that's the question. And here's the answer. Nobody knows, . You're welcome. Have a good afternoon. Um, what it means is that we are in an up trend. Um, now, you know, we, we look at a whole lot of things to try to figure out, you know, how long it's gonna go. And now we don't make, you know, we follow trends, um, in our portfolio management process. So we don't, we don't change portfolios based on what we think is gonna happen. We wait un until we can see the trend and define it mathematically, and then we make adjustments. But of course, we're all still taking a look at, you know, what can we expect next.
(05:23):
One of the things that's a little bit concerning about this bowl, and this is one of those things that's leading to that question about whether or not it's real. Mm-hmm. is the indexes, the index specifically, like the s and p 500 is up 20%. But fun fact, um, the majority of that gain is seven stocks. Oh, the, uh, just seven stocks just out of the 500 that are in the five. The s and p 507 stocks are accounting for almost all of that, of that, of the recent gains, not the whole 20%, but the recent gains. And that leads a lot of people to say, well, is it real? Because you've, if you've only got seven out of 500 right, that are actually accounting for this, um, then is it really real? And one of the things about the s and p 500 is, yes, there are 500 stocks in it, but not every stock is equally represented.
(06:16):
It's, um, the bigger the company, the bigger the company that, of the stock that they're tracking, the more of the index it occupies. So if you've got monstrous companies like Apple, which has a huge market capitalization, like the total value of all Apple stock is enormous. It it, it accounts for a pretty substantial part of the s and p 500 s performance up or down. And so those seven stocks, which happen to be all very large companies, um, account for a significant part of it. Now this week since June 8th, we've seen more and more companies begin to participate in that uptrend. But that's one of those things that, that make, that gives us pause and makes us wonder about how solid this, this trend really is. So then the question here is when will it end? Right? Sure. And you know, these, these trends can go on for a long time.
(07:09):
The, the typical bull market goes on for, you know, several years. Um, it's, it's often two steps forward, one step back. So a typical bull market may go for three, three and a half, even four years. And then a bear market may only last about a year and a half recently. Those, those changes have been a lot shorter. So like I said, the, the, the bear market really only started last June and it turned back up in October. That's not very long. And even the bull market is less than the beginning of this bull market is less than 12 months since the bear market started. So, you know, you don't know, um, there's, there's plenty to be concerned about, about, you know, when we start thinking about when it's going to end, there are things like, you know, inflation is still running higher than really would be comfortable to support economic expansion for a long time.
(08:04):
And a bull market, um, job growth is slowing. That's, that's a concern. Um, there's still that real likelihood of recession, you know, there are all kinds of signals that are telling us that a recession is still coming. I've been saying that for a while now, and I still believe that we'll, we'll see it probably later this year. Um, maybe a little bit at an X that doesn't necessarily mean that the market will go down, but a recession is usually accompanied by a down market. So, you know, we don't know. Now, one of the other old expressions in the stock market is that the, um, that the market climbs a wall of worry. So when you really have to worry about stuff, when you really should, should get nervous is when everybody's in agreement that there's nothing but up from here. trees grow to the sky, you know, we, this, this is great, this is never gonna end. That's when you should probably, yeah. Cut back on stocks and run for the hills, right? . But as long as people are really worried about stuff now, I think that a lot of these things are worth worrying about. Things like unemployment filings and continuing claims and those kinds of things are, uh, are, you know, our concerns. Um, but again, you know, nobody predicts this stuff. Well, we're watching a whole lot of things, but we won't make portfolio decisions until we see the stock market actually change its direction.
Speaker 1 (09:28):
Now when you talked about these, just these seven stocks or whatever, that, that is the majority of this rise, what does that say anything else about an industry or is that, uh, you know, specific to a certain type of trend in the market that like, oh, it's all computers and all the computers are selling or, or something like what does that mean?
Speaker 2 (09:50):
Yeah, well, it, it, it's a good point. Um, you know, one of the things that, uh, it's worth talking about is that just because the s and p 500 is doing something doesn't mean that everything in the s and p 500 is doing that. And so you could separate the economy into different sectors, and some sectors may be doing great, and some sectors may be doing terribly, and, you know, so you can't really tell what each sector is doing based, just based on looking at the s and p 500. So as you're pointing out, as you're suggesting really, really big companies are doing really well, um, uh, technology companies are doing really well. Technology is one of, is probably the top sector at the moment. Um, and so yeah, it, it could be just a whole lot of excitement about things like artificial intelligence and yeah, you know, those kinds of things. The, that's really driving the index. Um, but that, that, but that's not that uncommon. You know, that that, um, that a small portion of just a few sectors may really be driving a lot of the index, but that is something to be concerned about. Those tech companies can be volatile. And so this, this bull could turn fairly quickly if people all of a sudden start souring on, for example, technology stocks,
Speaker 1 (11:06):
And especially if it's an AI bull and it turns on its master
Speaker 2 (11:11):
, it, it'd be like the Terminator market. It
Speaker 1 (11:13):
Will be like the Terminator market. Exactly. And now that we have a bull market, what should people be doing in response to that? Yeah.
Speaker 2 (11:20):
Well, you know, as long as things are going up, as long as the trend is up, we, we, we stick with our long-term allocations. However, it would be a good idea as this market has been going up to take a look at how your investments are spread across different kinds of investments. So if you had a, a good, a good allocation when things were lower and now stocks have gone up more than 20%, chances are those stocks are a bigger portion of your portfolio than the original allocation was. So as this goes up, it's worth taking a look at once a while and rebalancing it to whatever that allocation is ideal for you long term. That's probably the best way to respond to this.
Speaker 3 (12:04):
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Speaker 1 (13:30):
So Steve says, it's a bunch of bull what , what's your Yes, it is. What's your 30 minute action item? 30
Speaker 2 (13:37):
Minute action item. Since the market has now gone up more than 20%, take a look at how your investments are spread across different things. Take a look at your asset allocation and think about whether you should rebalance to take advantage of some of those profits and bring yourself back to your long-term allocation.
Speaker 1 (13:53):
All right, bull market defined. You can find us at 30 minute money, of course. Uh, please like and share and download and, uh, send an email to Steve if you have any questions. You can find him at focusedwealthadvisors.com. And I am Scott Fitzgerald from ROCVox.com for all of your podcasting and other media needs. Thank you for listening to 30 Minute Money. We'll catch you next time.