Happy Birthday, bull market. You’re really, really old.
Wednesday marks the seven-year anniversary of when the S&P 500 (SPX) started rising again after the financial crisis and recession. Since that time the index hasn’t dropped 20% from its high. It came close recently, dipping 13% from early November to a low in mid-February. But it avoided a decline of 20% (or more); so that means we are still officially in a bull market, even if it hasn’t felt that way recently.
Seven years may not sound all that long, but it is for sustained stock market rallies. Only two have lasted longer than this one, according to Standard & Poor’s. To illustrate how old the market rally is, Fortune translated its current calendar age into “market years.”
Like dog years, market years uses human life expectancy to calculate the market’s human equivalent age. The average American lives about 79 years. The average bull market: 59 months, according to S&P Dow Jones Indices.
So how old is the market in market years? It’s 112 and a half. (Here’s the math: 79 years is 948 months. 948 months, the average life of a U.S. citizen, is 16 times longer than the average 59 months of a bull market. Multiply the current bull market of 84 months times 16, equals 1,350 months, or 112 and a half years old.)
112—that’s pretty old. But here’s the thing: The oldest bull market is far older than the oldest human has ever lived. The longest bull market — the 1990’s dot-com boom—reached the market age of 151, before dying in March 2000.
How healthy is our current market septuagenarian? Not great. But still mobile. In terms of returns, the bull market hasn’t been as great as its duration. Since 2009, the S&P 500 is up just over 190%. The average return of all bull markets is 167%. The bull market with the best return, the one from the 1990s, soared over 400%. That might make you think the current bull market has longer to go. But what matters is not how high the market has climbed, but how that relates to current corporate profits. The average stock in the S&P 500 has a price-to-earnings ratio of 16 based on expected earnings in 2016. That’s higher than the 10-year average P/E of the market of 14, albeit not much higher. The Shiller p/e ratio, which is named after the noble laureate economist Robert Shiller and smooths earnings over time, is an even higher 21, vs. an average for that ratio of around 15.
The problem is corporate profits haven’t been growing. They have fallen for the last three quarters in a row. And expectations for profits in the first quarter have been coming down rapidly. Analysts now expect profits for the companies in the S&P 500 to fall 8% on average in the first quarter—a year ago the consensus forecast was for profit growth of 15%.
One of those two things has to change. Falling profits and high stock market multiples is not a health regimen that will keep a bull alive for very long.
So happy birthday, bull market. We hope you’ve got your burial plot picked out.
