IS THE 2013 BULL MARKET EXTREME IN HISTORICAL WAY OR NOT?

Most of the investors are concerned and sceptical about the future of this bull market. They think the market is generally overbought and shortly needs to come a huge correction. Below I want to prove that the markets are not in extreme zone. This year 24% SP500 gain is absolutely not unique.

If you look at that chart right below you can find the 24% is not special at all. In many many years were more than 24% gain. I know it happened only twice since 2000, in 2003 and 2009. But it might be a good signal. If something not happen so often it means the possibility is higher to occur again. The highest gain was between 40-45%. It is not possible to hit that percentage within 2 months remained but might be over 30% easily. One of my rule says if some trend get started we never know where and when ends. Remember that.

All in all 2013 is a very typical year for the stock markets. The 20-25% return is second most common data since 1927. Most of the traders are looking forward after this kind of year will be followed by falling movements. The fact is the opposite. Historically seen that after 20-25% return, the market keep continues the gaining in the couple of following years.

If we look at the chart of five years annualized return. The 2013 performance proves the same. From the end of 2008 until now, the return falls back into a common, 15–20% range. Which is a business as usual. So don’t belive that mantra the prices are in extreme levels, it is historically and statistically not proven and not true.

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The BFM Assets Team.