This is the longest running bull market and that fact alone brings caution, but this is really not one run but two.

The first leg began in the pits of the crash, bottoming around March of 2009. This part grew during a period of regulation and increasing debt with an economy reluctant to get back on track. The market and the economy diverged. The market recovered far quicker than the economy.

This first period of the market was the ‘tallest midget’ phase. Monetary policy drove interest rates to zero pushing yield seekers into equities. Most international markets were hurt worse than ours. Greece was near default and Italy and Spain were not far behind. European yields went negative.

Our equity markets went up because there was no other place to put money.

The second phase of this bull run is coming from increased earnings, repatriation of overseas funds, lower taxes and lower unemployment. Regulations are being clawed back in some fields, but at least slowing in their growth.

The tariffs and the growing debt are threats, but bull markets do not require perfection. They just require sound fundamentals and a dearth of alternative investments.

As interest rates increase the stock market becomes a riskier option and money will leave for the security of safe yields.

The fact that these two phases ran concurrently accounts for the length of the bull market, but it has really been two markets. Bull markets do not die from exhaustion, they die from bad policy. The Fed is inclined to restore interest rates modestly to avoid choking off economic growth, but we have never had a liquidity event as we experienced in the Fed’s string of QE strategies.

We remain the dominant market, but we should remember that fine tuning such an economic engine has stumped some of the greatest policy minds. However much we learn from our mistakes, and we have learned a lot, there are always new lessons awaiting us.

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