Market has a dubious anniversary

NEW YORK – The bull market is entering its third year this week, but it may not be a happy birthday for investors. Rising interest rates and decelerating earnings are likely to weigh heavily on stocks, and lofty energy prices could stifle whatever gains are left in the months ahead.

Oct. 9, 2002, was a gruesome day on Wall Street, with the major indexes striking five- and six-year lows on bearish brokerage reports. But it also proved to be a turning point for the Standard & Poor’s 500. And seven months later when that index had risen 20 percent – the classic definition of a bull market – economists at S&P declared the bear market over and dated the start of the bull market to that fateful October day.

On average, bull markets last about four and a half years, but most turn flat or lower by the 36-month mark, according to research by S&P. Four of the 10 bull markets we’ve seen since 1942 crumbled by the end of their third year.

How is the market doing this time? During the first and second years of the current bull market, the S&P 500 registered gains of 34 percent and 8 percent, respectively, slightly lower than average, by historical standards. If the trend continues, this year will see substantially lower gains – in the neighborhood of 3 percent or less.