Longest Bull Market in History

[joe sod]

Including reinvested dividends, European stocks have returned around 4% per annum since 1999, in dollar terms. Lagging the return on US stocks over the same period certainly but hardly "dire".

But only in dollars and only because the euro was at its lowest level ever against the dollar after its launch reaching a low of 0.9 euros to the dollar in 2000, it'd now at 1.1 dollars to the euro , surely the performance of the euro stoxx 600 should be expressed in euros not dollars. In any case we live in Europe not the US so why the fixation on the performance of the S and P 500. All the dividends have done is compensated for the loss due to inflation, in absolute terms you are just about getting back the money you invested in 1999 if you stayed invested through all the turmoil of the last 2 decades and the financial crash.

 

[Sarenco]

surely the performance of the euro stoxx 600 should be expressed in euros not dollars

You can express performance in whatever currency you want - as long as you are consistent in making comparisons.

We are not restricted to investing in European securities simply because we live in Europe. I've made the point before that the return on the MSCI Europe index and the MSCI World index are almost identical over the last 30 years.

Again, this has absolutely nothing to do with the unprecedented length of the current S&P500 bull market.

 

[Colm Fagan]

I'm astounded that, although bond yields are at record lows, more money went into bond ETF's (Exchange Traded Funds) in the first 10 months of 2019 than into their equity counterparts ($191 billion v $158 billion for equity ETF's). Why do private investors keep shovelling money into bonds?

 

[Sunny]

I'm astounded that, although bond yields are at record lows, more money went into bond ETF's (Exchange Traded Funds) in the first 10 months of 2019 than into their equity counterparts ($191 billion v $158 billion for equity ETF's). Why do private investors keep shovelling money into bonds?

Are they Net figures or simply inflows??

 

[moneymakeover]

Does the huge amount invested in bonds augur well for equities?

If like is being reported the recession fears are declining, then it's likely money will flow out of bonds into equities?

 

[Colm Fagan]

Are they Net figures or simply inflows??

The article doesn't state whether they're gross or net. The implication is that they're net. It seems that one of the key drivers for the growth in bond ETF's is that investors (and I think this includes institutions, not just private investors as I had assumed initially) are finding that constructing and running fixed income strategies with individual bonds is more expensive and less efficient than in the past because of regulatory reforms. Post-crisis reforms have caused banks and broker dealers to hold lower inventories of bonds, which reduces liquidity. ETF's (supposedly) improve the liquidity position. I'm not sure that would be true in a crisis, but that's a question for another day.
The report cited in the article was by a consultancy called ETFGI. There might be something on their website to answer your gross/net question.

 

[joe sod]

@moneymakeover well according to Phillip lane the former central bank governor it's because of the demand by the increased number of pensioners for "low risk" assets like bonds. Bonds have been in a bull market for along time , they have performed much better than the euro stoxx 600 and without the big turmoil that equities have experienced during the financial crash. Sure even the Anglo Irish bond holders got paid back but the poor bank shareholders got wiped out, then the ecb basically steps in and creates this huge extra demand for bonds which of course Phillip lane ignores.

 

[NoRegretsCoyote]

All the dividends have done is compensated for the loss due to inflation, in absolute terms you are just about getting back the money you invested in 1999 if you stayed invested through all the turmoil of the last 2 decades and the financial crash.

Inflation in the euro area has been about 1.5% pa since 1999.

Explain to me again how you would have lost in real terms by buying that index two decades ago?

 

[EmmDee]

I'm astounded that, although bond yields are at record lows, more money went into bond ETF's (Exchange Traded Funds) in the first 10 months of 2019 than into their equity counterparts ($191 billion v $158 billion for equity ETF's). Why do private investors keep shovelling money into bonds?

Without knowing the aim / strategy of the investors it's difficult to answer this. But I can think of two drivers; (a) an alternative to cash especially where negative rates are in place and (b) matching returns versus liabilities.

On the second point, I know trustees of DB schemes where, due to the ageing population in the DB schemes generally, are at a point where asset growth is no longer the driving force. They are now managing to "liability matching" i.e. just ensuring the portfolio is paying out to the scheme members.

These might drive bond / FI ETF demand

 

[Sunny]

Without knowing the aim / strategy of the investors it's difficult to answer this. But I can think of two drivers; (a) an alternative to cash especially where negative rates are in place and (b) matching returns versus liabilities.

On the second point, I know trustees of DB schemes where, due to the ageing population in the DB schemes generally, are at a point where asset growth is no longer the driving force. They are now managing to "liability matching" i.e. just ensuring the portfolio is paying out to the scheme members.

These might drive bond / FI ETF demand

There are also technical factors. Fixed Income ETF's are only in the last year or two becoming viable investments for many investors especially in the US. They always lagged behind equity ETF's so are coming from a much lower starting point. So much of the money could be normal fixed income investors coming into the product rather than a sign of confidence in the bond market. On top of that this year we have had Brexit, Trade wars, political instability, central bank activity etc etc..... Not surprised to see more going in to fixed income but that could reverse just as quickly....

 

[galway_blow_in]

But only in dollars and only because the euro was at its lowest level ever against the dollar after its launch reaching a low of 0.9 euros to the dollar in 2000, it'd now at 1.1 dollars to the euro , surely the performance of the euro stoxx 600 should be expressed in euros not dollars. In any case we live in Europe not the US so why the fixation on the performance of the S and P 500. All the dividends have done is compensated for the loss due to inflation, in absolute terms you are just about getting back the money you invested in 1999 if you stayed invested through all the turmoil of the last 2 decades and the financial crash.

Every nations market performance should be measured in euro ( from the POV of those who live in Ireland)

Anything else is purely academic

 

[joe sod]

Just when it looked like the euro stoxx 600 might finally push past its year 1999 peak trump sends it crashing back down again with renewed threats of sanctions.

 

[galway_blow_in]

Just when it looked like the euro stoxx 600 might finally push past its year 1999 peak trump sends it crashing back down again with renewed threats of sanctions.

Out of curiosity, where was the ISEQ in 1999?

 

[joe sod]

Out of curiosity, where was the ISEQ in 1999?

I dont know but from memory it was around 3 or 4000 points , its now at almost 7000 points after a very good recovery this year. It reached its all time high in 2007 of around 10,400 points and then a catastrophic fall to 2000 points in 2009 following the banking and property crash, so it has been very volatile over the last 2 decades more like an emerging market economy.
It wasn't really badly hit in 2001 after the dot com crash because it was fairly light on technology stocks (although it had baltimore technologies and riverdeep then) , today I dont think there are any technology stocks in the iseq even if we have a "silicon docks"

 

[galway_blow_in]

I dont know but from memory it was around 3 or 4000 points , its now at almost 7000 points after a very good recovery this year. It reached its all time high in 2007 of around 10,400 points and then a catastrophic fall to 2000 points in 2009 following the banking and property crash, so it has been very volatile over the last 2 decades more like an emerging market economy.
It wasn't really badly hit in 2001 after the dot com crash because it was fairly light on technology stocks (although it had baltimore technologies and riverdeep then) , today I dont think there are any technology stocks in the iseq even if we have a "silicon docks"

Interesting ( for me anyway) that despite the enormous fall to 2000 points in 2009,based on the recovery to today's level, an investor would have done better buying the S+P the same year

U. S market has more than trebled since even the high point of 2009

 

[joe sod]

@galway_blow_in I would much prefer to have been an investor in the eurostoxx 600 back in 2000 than the iseq, as bad an all as it performed it did not have that catastropic collapse in 2009 that the irish market experienced. Alot of irish people were wiped out by that collapse , even recently look at the effect of brexit on the iseq it had a much bigger impact than it did on the ftse.

 

[galway_blow_in]

@galway_blow_in I would much prefer to have been an investor in the eurostoxx 600 back in 2000 than the iseq, as bad an all as it performed it did not have that catastropic collapse in 2009 that the irish market experienced. Alot of irish people were wiped out by that collapse , even recently look at the effect of brexit on the iseq it had a much bigger impact than it did on the ftse.

bank of ireland is up more than 50% in the past four months , the banks had been massively shorted off the back of brexit fears .

no other country in europe experienced as severe a recession as us with the exception of Greece ( who.s stock market dropped to levels last seen in the late seventies from what ive read ) so you would expect the stoxx 600 to have done better than ireland over a twenty year period

i suppose investing in a very small market like ireland is not a terrific idea unless done in small doses , too little diversity

 

[joe sod]

bank of ireland is up more than 50% in the past four months , the banks had been massively shorted off the back of brexit fears .

yes i actually bought bank of ireland a year ago, so i experienced that big drop, its basically back where it was a year ago, thankfully the shorters can make big mistakes aswell. Of course the banks were in a completely different position in 2008 so the shorters were correct then, they get used to kicking the same old kicking boys. I remember after the technology crash in 2001 it took a full decade before the big tech stocks like microsoft and oracle became respectable again, they were still ridiculously cheap in 2011, microsoft has increased 5 fold since then and the dot com crash is long forgotten.

 

[galway_blow_in]

yes i actually bought bank of ireland a year ago, so i experienced that big drop, its basically back where it was a year ago, thankfully the shorters can make big mistakes aswell. Of course the banks were in a completely different position in 2008 so the shorters were correct then, they get used to kicking the same old kicking boys. I remember after the technology crash in 2001 it took a full decade before the big tech stocks like microsoft and oracle became respectable again, they were still ridiculously cheap in 2011, microsoft has increased 5 fold since then and the dot com crash is long forgotten.

Bank of Ireland went almost as low over the recent summer as it did in 2012

Microsoft reinvented itself in the past four years, it's only really took off since 2016

 

[joe sod]

2019 has been a great year to be invested in the stock markets, finally europe ,uk, ireland and emerging markets have performed well, its not just the US markets now. It got off to a terrible start mind you with the december 2018 panic sell off. It just shows you it never pays to follow the panic. The panics at beginning of 2016 and 2019 proved to be great buying opportunities. Of course at some stage maybe next year there could be a correction most notably in the US tech stocks. I came across a startling statistic last week, that the market capitalization of Apple is now worth more than the total S&P 500 energy sector, thats more than all the US oil companies combined. Its not so long ago that Exxon Mobil was the biggest stock in the S&P. Clearly Apple is a great stock but is it worth more than the entire energy sector?, afterall oil demand is still rising albeit more slowly than in the 2000s.