This incredible U.S. bull market will soon celebrate its nine-month birthday. Many exuberant investors are relying on a curious argument to make the case that the bull market has many more birthdays in its future: There have been a few other occasions in U.S. history in which the market rose by as much as it has since the March low, and following some of them the bull market continued a lot longer and rose a lot higher.
Of course, there were other occasions in which, at the comparable point of past bull markets, a bear market was just around the corner. I’ll let you try to guess to which of these occasions the exuberant bulls have chosen to draw parallels.
One of the parallels to which the bulls are drawing is the bull market that began on Mar. 9, 2009, following the Great Financial Crisis. At the nine-month mark of that bull market, in early December of that year, the Dow Jones Industrial Average DJIA, +0.49%
had gained 60%, rivaling the Dow’s 62% gain this year since the Mar. 23 low. As we all know, the bull market that started in 2009 continued for another decade and rose more than 180% additionally.
No wonder the bulls like that parallel. Far less bullish is another that just as easily could be drawn to the bull market that, according to the calendar maintained by Ned Davis Research, began on Feb. 27, 1933. As you can see from the chart below, at the nine-month point of that bull market it had just 69 more calendar days to live. Six months after that nine-month mark, the Dow was 16% lower.
To be sure, focusing on the 1933 parallel is just as shameless as the bulls’ focus on the bull market that began in 2009. A more systematic analysis needs to focus on all U.S. bull markets, not just those that are handpicked to reinforce a predetermined belief.
To conduct such an analysis, I focused on the 30 bull markets since 1900 in the NDR calendar that lasted at least as long as 2020’s. In the case of most of those bull markets’ initial nine months, the Dow had gained a lot less than it has this year. In each of the four cases in which it rose as much or more as it has this year, the Dow was lower over the subsequent six months.
In fact, according to my PC’s statistical software, there is a significant inverse relationship between the magnitude of the average bull market’s gain over its initial nine months and its gain over the subsequent six months.
With a sample as small as this, however, robust statistical conclusions are elusive. The most sensible thing we can say, based on parallels with past bull markets, is that the current bull market might continue for a very long time and go a lot higher — or it might not.
That’s hardly earth shattering, which is why you haven’t seen any headlines heralding this conclusion. But you should nevertheless keep it in mind as a reality check on the bulls who insist the historical parallels are telling a much more upbeat story.
Mark Hulbert is a regular contributor to MarketWatch. His Hulbert Ratings tracks investment newsletters that pay a flat fee to be audited. He can be reached at email@example.com
Editor’s note: This article was first published in September 2019.
A school break changed 66-year-old Martin Farber’s life forever.
In 2007, his daughter — who at the time was attending Illinois State University — decided she wanted to spend a college holiday volunteering in Costa Rica and staying with a local family, he explains. She came home raving about the experience, so, in 2008, Farber — who at the time was living in Evanston, Ill., just outside Chicago, and selling cars — took his first trip there.
“It was a big surprise to me — bumpy roads, dogs barking in the streets,” he says. “I wasn’t enamored at first.”
But as his daughter began traveling there more and eventually moved there for a year, he took additional trips to Costa Rica. It quickly grew on him — in particular, the people. “The Costa Rican people are warm, open and friendly. I felt less invisible in a strange country in a strange town where I didn’t speak the language than I did in Evanston.”
And the more time he spent there, the more it impacted him: “On one of my trips there, I thought: My daughter’s life makes more sense than mine,” he says. “There was nothing wrong with my life, but I felt that my life was out of context with who I’d become. … I would have bills and make money to pay them, but that had ceased to be satisfying,” he recalls. “I knew I needed to change my life — there was no more joy in what I was doing.”
What’s more, when he’d return from his Costa Rica trips, people noticed. “I would come back, and my friends and therapist would say: You seem better after you go,” he says with a laugh.
Here’s what his life is like, from costs to health care to residency to everyday life:
The cost: While many expats spend way more living in Costa Rica, Farber says: “I could live on my Social Security and still save money.” He says “a person can live on $1,200 per month, two people on $2,000.” The key, he says, is to live more like he does and as the Costa Ricans do — in a modest home, eating local food and purchasing local goods.
Indeed, Farber himself spends just $300 a month for rent (he rents a home from a friend who moved recently and gave him a good deal), roughly $225 a month on groceries and just $50 a month total on water and electricity (the temperate climate in Orosi means you rarely need heat or air conditioning). The veteran Volkswagen VOW, +0.96%
salesman saves money by not owning a car (those over 65 ride municipal buses for free), which can be a significant expense in Costa Rica; for his cellphone, “I pay as I go … roughly $10 may last me a couple weeks or more,” he says, adding that “many people handle there their cellphones this way. You can get them recharged anywhere.”
His major expense is travel: He goes back to the U.S. to visit his mother in Florida several times a year and lately has spent part of the summer in Chicago helping out a friend with a dealership there. He also spends a good amount of money on health care. He says that while flights can be had for as little as $350 roundtrip during offseasons, the cost can be much higher the rest of the year.
When he developed a detached retina, though, he paid for the procedure out of pocket so that he didn’t have to wait for the required surgery, he says — adding that the entire procedure cost him about $5,000. “I would have had to have waited four days,” he says, if he had not paid to expedite matters. “That might have been fine, but it might not.” And he adds that the quality of care depends on where you get it in the country.
Lifestyle: Though Farber says that he “moved here with no goals and no agenda,” he’s found plenty to do. “I take Spanish lessons two days a week for two hours a day. It’s been great. I never thought I would acquire a usable language in my 60s,” he says. He also rides his bike all around the area, does some writing and belongs to a community group that undertakes projects to improve the area.
And he often simply takes in nature, which he says has been an essential part of why he feels calmer and more relaxed in Costa Rica than in the U.S. “I live at 3,000 feet but in a valley surrounded by coffee fields and lime trees and water. At night, if I open the windows, I can hear the river rushing by,” he says. “It is very calming … hundreds of trees everywhere … you know the Earth is alive.”
Cons: “I don’t want to overglorify. It’s not without its problems,” Farber says of Costa Rica. “There are social problems and downsides.” He notes that crime and petty theft can be a problem (“I am cautious,” he says of his approach) and seem to have increased since he moved there, and adds that he misses out on some cultural things because of where he lives. And, he says with a laugh, “I can’t order Thai food at 9 at night.” But, he adds: “These are trade-offs — in the afternoon, I get to walk in the coffee fields and see flocks of parrots.”
Residency: To qualify for Costa Rica’s pensionado visa, expats must prove that they have a pension of at least $1,000 coming in each month. (Here are the details of that program.) Once you have lived in Costa Rica for three years, you can apply for permanent residency. Farber used a lawyer to help him figure out the ins and outs of residency options; his entire path to permanent residency took about a year, he says.
The bottom line: “After five years I am still amazed and surprised that I made the decision to lead a life I never thought I would,” he says. And while he may not stay in Orosi forever — “the town doesn’t have an ambulance, [and] I don’t know what it will be like to be 80 there,” he says — he does plan to stay in Costa Rica in no small part because of the people and sense of community. “I have the feeling that life is good here,” he says. “It’s hard sometimes, but we are all in it together.”