Page 25 - ARUBA TODAY

BUSINESS Tuesday 21 augusT 2018
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Born out of the financial crisis, bull market nears record

By BERNARD CONDON turned to buying, avoiding alternative but to pile into sell and waited for profits to recessions were preceded
Associated Press a 20 percent drop in stocks stocks. rise again. In 2016, stocks by rate hikes by the Federal
NEW YORK (AP) — The that by common definition Companies moved fast to gained 10 percent then Reserve.
bull market in U.S. stocks is marks the end of bull mar- adapt to the post-finan- jumped 19 percent the With stocks richly priced,
about to become the lon- kets. cial-crisis world of sluggish next year. Since the start there isn’t much room for
gest in history. things to go wrong.
If stocks don’t drop sig- The prices investors are
nificantly by the close of paying per share for com-
trading Wednesday, the panies are 2.2 times reve-
bull market that began in nue per share, near historic
March 2009 will have last- peaks. And prices com-
ed nine years, five months pared to long-term earn-
and 13 days, a record that ings are much higher than
few would have predicted in 2007 before the market
when the market struggled crashed.
to find its footing after a 50 For all its longevity and
percent plunge during the gains, the final verdict on
financial crisis. the bull market won’t be
The long rally has added known until it ends.
trillions of dollars to house- The financial crisis of 2008
hold wealth, helping the that ended the last bull
economy, and stands as market laid bare just how
a testament to the ability much debt and risk-taking
of large U.S. companies to had fueled gains in the pre-
squeeze out profits in tough vious seven years. The dot-
times and confidence com bust that ended the
among investors as they 90s rally showed how reck-
shrugged off repeated cri- less investors had been.
ses and kept buying. This time, many of the un-
“There was no manic trad- In this Jan. 4, 2018, file photo a stock trader wears a “Dow 25,000” hat at the New York Stock answered questions con-
ing, there was no panic Exchange. Associated Press cern the Fed’s monetary
buying or selling,” said Jack stimulus.
Ablin, chief investment of- “I don’t think anyone could U.S. growth. of 2018, they have risen 6.6 How much did it help
ficer of Cresset Wealth have predicted the length They slashed costs and kept percent, boosted by surg- boost stocks, and thus the
Advisors. “It’s been pretty and strength of this bull wage growth low, squeez- ing profits following the broader economy? Will
steady.” market,” said David Lebo- ing profits out of barely massive cut in corporate the gains it helped manu-
The question now is when vitz, a global market strat- growing sales. They bought tax rates earlier this year. facture prove ephemeral?
the rally will end. The Feder- egist at JPMorgan Asset back huge amounts of their Several dangers threaten What are the long-term
al Reserve is undoing many Management. own stock and expanded the rally. costs of its unprecedented
of the stimulative measures One of the market’s big- their sales overseas, partic- The Fed has hiked its economic rescue effort as
that supported the market, gest winners in recent ularly to China’s booming benchmark lending rate it faces the tricky task of
including keeping interest years, Facebook, wasn’t economy. Profit margins twice since January, and unwinding its stimulus pro-
rates near zero. There are even publicly traded when reached record levels, as is expected raise it twice gram?
also mounting threats to the bull market began. wages sunk to record lows more by the end of the Another question is the wis-
global trade that have un- Facebook’s huge run-up as measured against the year. dom of so many buybacks.
settled investors. of more than 350 percent size of economy. Stocks could suffer as Companies have spent tril-
For such an enduring bull since going public in 2012, “What people missed was higher interest on bonds lions in recent years repur-
market, it shares little of the Apple’s steady march how quickly U.S. corpora- convinces investors to start chasing their own stock,
hallmarks of prior rallies. to $1 trillion in value, and tions were restructuring shifting money into this saf- which has helped lift prices
Unlike earlier rallies, individ- huge gains by other tech and right-sizing themselves er alternative. Higher rates in the short term but does
ual investors have largely companies like Netflix have to regain profitability,” said also increase costs for busi- nothing to expand op-
sat out after getting burned helped push the broader money manager James ness and make expanding erations, train workers and
by two crashes in less than market higher. Abate, who publicly urged operations more difficult. generally improve their
a decade. Trading has Since the rally officially be- investors to start buying More worrisome, rising rates business. Many of the pur-
been lackluster, with few gan on March 9, 2009, the stocks in early 2009 when can trigger recessions, chases were made with
shares exchanging hands Standard and Poor’s 500 most were dumping them. which often kill bull mar- borrowed money, adding
each day. Private compa- has risen 321 percent. In “It was really a catalyst for kets. Three of the past five to already sizable debts.q
nies have shown little en- the 1990s bull market, the turning things around.”
thusiasm, too, with fewer current record holder for Then came a downgrade
selling stock in initial public the longest, stocks rose 417 of the U.S. credit rating in
offerings than in previous percent. August 2011, which caused
bull runs. From the start, the Federal stocks to swoon, and 2013
Yet this bull market has Reserve was a big force brought another fall as Fed
been remarkably resil- pushing markets higher. Chairman Ben Bernanke
ient. After several blows It slashed short-term bor- talked of easing off stimulus
that might have killed off rowing rates to zero, then policies. In the second half
a less robust rally — fears began buying trillions of 2014, oil plunged 50 per-
of a eurozone collapse, dollars of bonds to push cent, which rattled inves-
plunging oil prices, a U.S. longer-term rates down, tors again.
credit downgrade, Presi- too. Investors frustrated Profits started falling the
dent Donald Trump’s trade with tiny interest payments next year, but investors
fights — investors soon re- on bonds felt they had no kept their nerve and didn’t