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FILE - In this Monday, March 3, 2014, file photo, specialist Gregg Maloney works on the floor of the New York Stock Exchange. Despite fiscal deadlock in Washington that pushed the U.S. to the brink of default, a major debt crisis in Europe, slowing growth in China and innumerable crises from Syria to Ukraine, stocks have kept moving higher. On Monday, March 10, 2014, the bull run enters its sixth year. (AP Photo/Richard Drew, File)
Despite obstacles, the bull market turns 5
Resilient » With record profits and improving economy, stocks still have room to run, experts say.
First Published Mar 09 2014 10:25 am • Last Updated Mar 10 2014 04:32 pm

New York • Happy 5th birthday, bull market.

The current bull run is not the longest, or strongest in history, but it has survived a near default by the U.S. government, a debt crisis in Europe, and a war in Syria.

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Despite all the obstacles thrown in its way, this bull market is now the fourth-longest since 1945, according to S&P Capital IQ. The Standard & Poor’s 500 index is up 178 percent in the five years since it bottomed out on March 9, 2009.

A bull market is a rise of 20 percent or more over a period of at least six months, following a decline of 20 percent or more. The run-up over the past five years has been helped by stimulus from the Federal Reserve, record corporate profits, the economic recovery and companies repurchasing their own stock.

The current bull had a tough start to 2014. In January, the S&P 500 index fell 3.6 percent on concerns about slowing growth in China and other emerging markets. Investors also worried about the strength of the U.S. economy. This month, the market has been rattled by events in Ukraine, where the region of Crimea is preparing for a referendum on whether to split away and join Russia. President Barack Obama and several other Western leaders have condemned the referendum.

Despite the latest setbacks, stocks recovered and the S&P 500 index closed at a record high of 1,878.04 on Friday.

There have been 11 bull markets since 1945. The longest one stretched for almost a decade, between October 1990 and March 2000. The average bull market lasts 4½ years, making the current one longer than average.

The last bull market ended in October 2007, as the financial crisis was taking hold. The S&P 500 index dropped 57 percent from a record high of 1,565.15 on Oct. 9, 2009, before bottoming out at 676.53 on March 9, 2009.

Typically, bull markets end when investors get spooked by a recession, or anticipate one, and sell stocks. None of that is happening, which suggests this bull may have room to run yet. The economy appears to be strengthening rather than faltering. Corporate profits are at record levels. The job market is gradually improving and consumer confidence is rising.

Inflation also remains low. When the Fed starts to worry about rising prices, it hikes interest rates to curb them. The higher rates can tip an economy into recession and prompt a sell-off in stocks.

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But with inflation under control, the Fed has stressed that it plans to keep its key short-term rate near zero for an extended period.

Stock valuations remain in line with historical averages, says John Manley, chief equity strategist at Wells Fargo Fund Management. The price-earnings ratio for the next twelve months, which measures stock prices compared with forecast earnings, stands at 15.5, slightly below its 20-year average of 16.4.

The stock market is "not cheap, but it’s not expensive either, so I think the market continues to move higher until further notice," Manley says.

The bull market’s gain is above the average advance of 141 percent for S&P 500 bulls. But it is well short of the 417 percent jump from October 1990 to March 2000.

Here is what’s changed since the bull run began:

Here’s what you could’ve won • Since starting its advance in March 2009, the S&P 500 has handed investors a total return, including reinvested dividends, of 209 percent. If you’d played it safe and invested in bonds, your total return would be 28 percent over the same period, according to the Barclays U.S. aggregate index, which tracks the broader debt market. If you’d played it even safer and invested in short-term government debt, certificates of deposit and other short-term debt securities, your return would be even smaller. Fidelity’s money market fund, which makes such investments, returned 4.1 percent over the same period.

Best performers • The best-performing stocks in the S&P 500 index during the five year bull market are a drugmaker, a hotel company and a broadcaster. Regeneron Pharmaceuticals, which is developing an experimental asthma drug, has climbed from $12.40 in March 2009 to $328.11 on Friday. That’s a cumulative return of 2,546 percent, making it the best-performing stock since the start of the rally. Wyndham Worldwide, a hotel and lodging company that owns the Ramada and Days Inn, has soared from $3.10 to $75.70 as demand for hotels revives. The company has also raised its dividend. CBS has climbed from $3.09 to $67.40 as advertising revenue increased.

The laggards • Among stocks still in the S&P 500 index since the start of the bull market, the worst performers are a solar panel maker, a mining company and a supplier of wholesale electric power.

First Solar’s shares are down from $108.36 to $56.11, a drop of 48 percent. The company has struggled to adapt to sharply lower panel prices. Newmont Mining has dropped from $37.79 to $24.60, hurt by falling gold and copper prices. Exelon, the nation’s largest supplier of wholesale electric power, has dropped from $43.84 to $29.82 as electricity prices have fallen.

The economy • When the stock market hit rock bottom, the economy was struggling, too. Jobs were harder to find five years ago and the U.S. had yet to emerge from the Great Recession. Economic growth has since strengthened, but the recovery remains slow.

When the bull market began in March 2009 the unemployment rate was 8.7 percent. It rose to 10 percent in October that year, its highest level in 26 years. It has since fallen, and was 6.7 percent in February.

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