How Much Longer Will the Bull Market Run?

Source: Thinkstock

Source: Thinkstock

The most hated bull market in history continues to raise more questions than answers. For instance, how much credit should the Federal Reserve receive for the rally, and when will corporations feel confident enough to increase capital expenditures? However, there is one question that everyone would like answered: How much longer will this bull market run?

Read more: 5 Charts to Explain Labor Market Health

Despite having a bearish outlook in the short term, the majority of traders believe the bull market will keep running for quite some time. According to a new sentiment survey from Charles Schwab, about 28 percent of respondents said they are confident that the 5-year-old bull market will continue for another three to six months, and an additional 25 percent said it will last through the end of 2014. Another 42 percent of those surveyed believe the bull market won’t end until some point in 2015 or later.

Only 5 percent said the bull market has already ended. Over the next three to six months, 20 percent of traders said they have a bearish outlook, which is double from the 10 percent of traders polled in the December 2013 survey. Respondents were most bearish on utilities, consumer discretionary, and materials.

Read more: Retirement, 401(k)s, and How You’re Probably Getting Ripped Off

“Over the longer-term, traders surveyed are overwhelmingly optimistic that the bull market will continue, however, the increasing near-term negativity shouldn’t be ignored,” said Randy Frederick, managing director of trading and derivatives at the Schwab Center for Financial Research, in a press release. “This bull market will need a catalyst to bring down the highs which may turn out to be the ongoing situation in Ukraine. The marked uptick in bearish sentiment in the materials sector may also point to traders’ increasing concern about the overall health of the U.S. economy.”

After a record-setting performance last year, stocks had a mostly lackluster first quarter. In the first three months of 2014, the S&P 500 gained 1.3 percent, while the Dow Jones Industrial Average fell 0.72 percent — its first quarterly decline in a year. It was the worst quarterly performance for the S&P 500 since the fourth quarter of 2012, but the index still managed to rise for the fifth consecutive quarter. The Nasdaq, which was the best performer earlier this year, only edged slightly higher, as high fliers like Facebook (NASDAQ:FB), Tesla (NASDAQ:TSLA), Google (NASDAQ:GOOG), Amazon (NASDAQ:AMZN), and biotech firms all tanked in March.

Read more: How Does Your Bank Match Up? 6 Questions You Should Be Asking

Looking at history, an argument could be made either way about the longevity of the current bull market. Using the definition that a bull market is a period in which the S&P 500 gains 20 percent or more without a decline of 20 percent in between, the bull market has already traveled about 1,850 calendar days, making it the fifth-longest bull market since 1928, according to Bespoke Investment Group. It is also approaching the fourth-strongest bull market, which took place over 1,904 days, between July 2002 and October 2007.

However, this is hardly the longest bull market investors have experienced. In order to move into fourth place, the S&P 500 would need to rally through Memorial Day. Furthermore, stocks would have to keep climbing higher without a correction for another seven years before surpassing the longevity of 1987-2000 bull market. Most would agree that this is very unlikely, but it is certainly within the realm of possibility.

Instead of focusing on how much longer the bull market will last, investors should remember that trying to time the market is a dangerous strategy. “Popping in and out of markets trying to catch the wave at just the right moment rarely works for the vast majority of investors,” explained Charles Schwab in a recent blog post. “Neither ‘get in’ nor ‘get out’ are investment strategies; they’re gambling on a moment in time. Investing should never be about a moment in time; it should be a process over time.

“With the exceptional case of some highly disciplined and experienced traders who follow a diligent process and strategy and can be successful trading in and out of markets, treating investing like a momentary decision usually results in poor performance: in too late for the big rallies, right on-time for a crash, out too early to miss the big returns again, and so on. It’s not a good situation, but we see it time and again.”

More From Wall St. Cheat Sheet:

Follow Eric on Twitter @Mr_Eric_WSCS