Jul 8, 2019

Global Bull Markets and Earnings Growth

As the current bull market is now 93 months long (since 1970, the average bull market has lasted 56 months), the question naturally arises whether a market correction is due.

Putting this question in perspective, since 1970, there have been 8 “troughs” in the MSCI World Index returns (a “trough” being defined as market bottoms after declines of at least 20%). A majority of these troughs (5 out of the 8) have been associated with recessions (1973-1974. 1980-1982, 1990-1991, 2000-2001, 2008) and double-digit earnings declines.

Notice below the 5 market troughs that experienced associated recessions and double-digit earnings declines. Currently for 2019, global earnings are forecasted at 5% and GDP forecasts are 1.5% for developed markets and 3.4% for emerging markets. The conditions for a 20% decline in the global market do not seem baked in. This bull market could continue – assuming we do not experience any global shocks.

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