The bull market can’t last forever, and investors are preparing for the next bear market by raising cash and rebalancing their portfolios towards less risky holdings, The Wall Street Journal reports. The specters of rising inflation, rising interest rates and international trade conflict threaten to put an end to the so-called Goldilocks Economy that has been propelling stock prices upward. “Until now, the expansion was seen as one that could go on and on without any signs of price inflation, and that’s being questioned now,” as Larry Hatheway, chief economist at Zurich-based asset management firm GAM Holding, which oversees $163 billion of client assets, told the Journal.
From the start of 2017 through the close on March 13, the S&P 500 Index (SPX) has risen by 23.5%. In 2017, the widely followed market barometer notched 62 record high closes, second only to 77 in 1995, per MarketWatch, citing research from the WSJ Market Data Group. The most record high closes for the month of January had been 11, set in 1964. That record was surpassed on January 23, 2018, per the same sources, and was followed by two more record high closes, the last on January 26, for a total of 14. (For more, see also: 5 Factors That Will Determine The Stock Market’s Future.)
The Return of Volatility
However, the euphoric mood was shattered by a long overdue correction that sent the S&P 500 down by 10.2% between the closes on January 26 and February 8. Since its all-time record high set at the close on January 26, the index is down by 3.7% as of the close on March 13.