Dear Valued Clients and Friends,
In this week’s Dividend Cafe:
- We look at the bull market we have been in …
- Evaluate what might cause this secular bull market to end …
- And make a true portfolio recommendation as to what to do around this big debate.
Let’s jump into the Dividend Cafe …
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Getting Past the Clickbait
It has to be said before I write one single word of this article: The answer to the question in the title of the article is “yes” – because with the right timeline and proper use of the English language, life is one big bull market. I understand there are cycles in history (known only in hindsight) and that bear markets, bull markets, and range-bound markets are all part of the reality of history. However, it is my belief that what we call bear markets and range-bound markets are things that exist inside of one gigantic bull market. This can be validated visually with a 100-year chart of the market:
One would really need to know their history to [visually] see here something called a “bear market.” But I assure you, they happened – and they are quite uncomfortable for people when they do happen. The recessionary periods in the chart are so frequent that it almost looks like a brown-and-white striped bar chart. But in fact, the black line (the market itself) still looks like a single diagonal line straight from San Diego to Maine. This is my view of enterprise and the profit motive. This is my view of human ingenuity and action. And so the bull market continues, because all of life is one big bull market, properly understood.
Now, let’s get on with the subject of today’s commentary.
Semantics Aside
Within the great bull market of history, there are periods of bull and bear markets, and the U.S. stock market has been in a substantial bull market for some time. There are a few ways to look at this, and I don’t care much how you want to parse it out. One is to view this bull market as beginning in November 2022, when the Fed-induced market decline of 2022 ended. The S&P 500 closed at 3,577 on Oct. 12, 2022. It hit 7,002 in late January, essentially doubling in just over 3 years (a 23% compound annual growth rate). You could also start in 2019 when Powell reversed course on 2018 Fed tightening. After a late 2018 drop, the S&P was below 2,350. So you could basically say that over seven years, this “bull market” saw a near tripling of markets, compounding at 16.9% per year along the way.
Now, there are impurities in all of this. The market did, sort of, drop 20% in the 2023-2025 version of the bull market – even though it never did on a closing basis, and even though it lasted about five seconds. But the Liberation Day sell-off of Tariff Mania April 2025 was a brief ~20% (ish) drop, so purists would say the “bull market” was interrupted. And even in the 2019-2025 version of the case of a near 300% return, there was not only Liberation Day 2025, and the genuinely bad S&P year of 2022, but there also was the nightmarish swoon of March 2020 when COVID came (a drop that was over 30%, again, though, for a short-lived period).
I would propose that the best time period to describe “this bull market” has it beginning March 2009. The S&P’s bottom out of the post-Depression mother of them all was 666 (creepy, eh?) – meaning that the market has compounded at 15% per year for 16 years. And yes, most recently we have Liberation Day, the 2022 year, COVID, and the Fed 2018 Q4 drop, but we also had the summer 2011 drop before that, and plenty of other 10-19% drops that don’t quite hit the 20% level where some “market czar” gets to call something a bear market. The reason the March 2009 start to a secular bull market seems most cogent to me is not because of a technical or mathematical reason, for as we have shown, there have been five points along the way that either went down -20% on an intra-day basis (purists demand a closing day price to be considered) or were close enough. Rather, it is practical and rooted to sentiment – the market drops we have had have been so short-lived relative to the other 20% (or greater) drops in history that we generally refer to as bear markets, that it seems “functionally” appropriate to refer to this entire post-GFC period as a bull market.
But I am not ignorant of what I am doing here. The language is creating a death of a thousand qualifications as to how we do or don’t define these things. So rather than stick in this semantics boredom much longer, I will let you think we have been in a bull market for three years, or seven years, or sixteen years. For my purposes today, I can accept any of the three.
Because all I want to ask is whether or not this three-year, or seven-year, or sixteen-year bull market (your pick) is in danger of ending. This is not about Iran. This is not about oil. This is about the sustainability of what has been, by any reasonable definition and in any of the aforementioned time options for bull market description, a mind-numbing bull market.
And I think there are economic and market questions to evaluate about where things stand, even apart from the Iran dynamic that has been the source of headline noise over the last few weeks.
What I am Not Doing
I. Am. Not. Doing. Economic. Forecasting. I am asking questions and looking at various economic indicators, with the presupposition that knowing the answer to the question is not attainable. I am interested in a description of what is going on, but not a prediction of what will prove true. I cannot think of a single asset allocation decision I would reverse if I did know more about the economic reality of the moment than I do, as I not only believe that (a) I don’t, but (b) If I did, markets cooperating with the higher plane of knowledge I magically obtained would not be assured. I have talked about all of this many times over the years – Asset Allocation reflects what we do not know, not what we do know.
My friends at Strategas Research (from the piece titled Mar. Market Balance Sheet: Shareholder’s Equity Deteriorates as of March 27, 2026) have suggested that the sustainability of this current bull market we have been in depends on three things:
- Continued strong employment
- Beneficial financial conditions
- Growing corporate profits
The outlook in all three warrants consideration, even when divorced from the challenges of the Iran war. So let’s do that.
Employment Picture
There is more ambiguity about the labor market in America than there is about financial conditions and corporate profits. Now, I think all three have nuance and challenges around their assessments, but labor markets reflect outright contradictory data, which is different than merely slowing or changing conditions or a forecast of something changing later. In the here and now, we have data points around labor that are really hard to pin down. The running average for weekly initial jobless claims sits at 210,000, a low and benign number that indicates very few firings are taking place. At the same time, the JOLTS data (Job Openings and Labor Turnover Survey) shows a hiring rate of 3.5%, well below its recent levels. The last month showed 6.9 million open jobs, almost (not quite) a 50% reduction from the 12 million we saw in 2022. The “quits” rate sits at about 2.2%, down substantially from where it was 3-4 years ago (employees are far more likely to “quit” a job when they are highly confident of being hired elsewhere). The NFIB Small Business Optimism Index reflects the lowest plans for new hiring in quite some time. They are not recessionary, but they have cooled substantially. This is consistent with similar intentions reflected in the ISM Manufacturing and Services PMI. Unemployed workers are definitely taking longer to find work.
But here is the thing … It is still harder for employers to fill open positions. A jobs market cannot be called seriously weak when employers still find open jobs hard to fill. Plenty of data suggests weakening, or at least moderating, but not deteriorating conditions. But to say there is a sort of “data purgatory” right now is pretty fair.
Financial Conditions
There is no question that financial conditions have begun to tighten, albeit from historically loose levels. Interest rates have been volatile as of late, but much of that is clearly war and oil-related. Credit spreads have widened, but not to historically dangerous levels. The Fed has been in a “hawkish pause” (and indicates it will be for some time). But empirically, excess reserves at the Fed indicate more cash parking and less loan deployment. Economic uncertainty causes banks to hoard liquidity, which is more or less what defines tighter financial conditions.
The Senior Loan Officer Opinion Survey has reflected tighter lending standards for commercial and industrial loans over the last few months. Banks are holding larger buffers than they have in the past.
The spread between SOFR (bank’s overnight financing rate) and IORB (interest they get on reserves at the Fed) has moved into tightening territory.
Reserves in the banking system are substantial, lending standards are tightening, and spreads indicate that conditions are tightening. At the same time, all of these directional realities have not arrived at a place where they can be called extreme. Not yet.
As Profits Go …
Corporate profits, on the other hand, are the bright light that continues to shine, right? We expect 11 consecutive quarters of quarter-over-quarter growth in Q2 when the Q1 results are announced. And year-over-year growth is expected to be around 12%. What could go wrong?
Well, 65% of business leaders surveyed expect profit growth in 2026, but the number indicating “optimism about the national economic outlook” has dropped from 65% to 39%. A significant number have now indicated that tariffs are a concern to their profit outlook. S&P earnings growth was about 12% in 2025 and is still expected to be 14-15% in 2026. The good news? Secular bull markets do not end on double-digit profit growth. They. Just. Don’t. The bad news? Some slowing or moderating of expected profit growth dampens valuation and sentiment, and the expectations may just be a tad overcooked.
The risk of disappointment is real, but there is no indication (right now) of true weakness. Margins seem likely to plateau, and that, combined with excess expectations, despite growing profits, can lead to the risk of a correction around the way this is all priced in markets.
But it is complete conjecture to say that profits will disappoint, let alone will weaken. For now, the mother’s milk of stock market investors enabled this robust, even frothy stock market environment. And it is not very helpful to say the truth, but the truth is that “this will continue to be the case until it is not the case.”
Historical Checklist
Valuations are high, yes. But is the market euphoric right now? Flows have slowed. Credit spreads have widened but not blown out. Sentiment has weakened. The VIX is high. The put-call ratio is higher than it has been. Defensive sectors have done better, but nowhere near the audacity of rotation that often indicates a true market shift. Caution has picked up. But the historical indicators that signal the end of a secular bull are not there yet.
Conclusion
The theme of humility that I suggested entering the new year is not merely still the theme I suggest entering Q2, but with even more emphasis and insistence than I suggested three months ago. From labor to financial conditions to corporate profits, neither bulls nor bears have a monopoly on argument or data. In fact, each side has competing data points that counter others, and the picture is murky, even without the elevated murkiness of a Middle East war.
The most bearish thing I can say is that this bull market we are living in has been going on a long time, with certain signs of excess.
The most bullish thing I can say is that this has been true for a long time, now, and it can’t be determined to be over until 20/20 hindsight says so.
And the most useful thing I can say is that, as a dividend growth investor, I have no dog in either side’s fight. And I am long the truly human things. To that end, we work.
Quote of the Week
“Bull markets can obscure mathematical laws, but they cannot repeal them.”
~ Warren Buffett
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I am giving my fourth speech in five days here in Fort Lauderdale shortly and then heading back to New York City, where I will have very little travel for three whole weeks (just one 24-hour trip to our Minnesota office the week after Easter). And yes, I am looking forward to this. Enjoy your weekends, and be grateful for the long-term bullishness that has empowered realists for decades.
With regards,
David L. Bahnsen
Chief Investment Officer, Managing Partner
The Bahnsen Group
thebahnsengroup.com
This week’s Dividend Cafe features research from S&P, Baird, Barclays, Goldman Sachs, and the IRN research platform of FactSet
