About the US stock market …

S&P 500, US Long Bond, daily, April 1st to May 3rd 2012

S&P 500, US Long Bond, daily, April 1st to May 3rd 2012

Investors typically will diversify their wealth between two different assets: stocks and bonds. In America professionals generally track the S&P 500 (a basket of the stocks of 500 different companies) compared to the “long bond”; a US treasury security with a maturity of ranging from ten to thirty years (when I first started in this business everyone looked at the 30 year bond but now the 10 year, for reasons I can’t go into here, is popular).

I’ve previously posted my doubts about the bull market we’re currently enjoying in US equities, specially its getting a little long in the tooth. The “average” bull market lasts about 3.8 years and this bull market, 105% since March 6th 2009, is as of today three years and one month and twenty seven days old. So how are we doing so far? Since January 1st the market is up 11.51% while the US 30 year bond (aka, the “long bond”) has lost -0.95%. This is very solid equity market performance YTD but is that all?

The chart above tracks the performance of the US equity market since during Q2 2012. The S&P 500 has lost -0.44% while the long bond has gained 3.91% so equity market performance is clearly lagging bonds, as disappointing jobs numbers and sharply slowing GDP raises doubts about US equities. So has this bull run its course? Difficult to tell, stocks, as the old expression goes, “climb a wall of worry” and we’re all definitely worrying now. And this is and election year after all. And we know the market generally rises during an election year.

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