Unloved Bull Markets

Chapter 1“Unloved” Bull Markets

Along with many other observers, Tom Keene of Bloomberg Surveillance Radio called the multiyear bull market,   from March 2009 to February 2020, “unloved.” We agree and believe that, for a variety of reasons, many investors chose not to participate in the market and missed out on a terrific opportunity to increase wealth. In previous bull markets, investors gained confidence and faith as the market advanced. Not this one. Unlike in previous bull markets, investors neither gained confidence nor faith in the workings of the market. If anything, the advance only encouraged the opposite: skepticism and doubt.

The Investment Company Institute (ICI) reports mutual fund data in its annual Investment Company Fact Book regarding annual inflows, outflows, and net flows for equity mutual funds beginning in 1984. Figure 1.1 shows annual net flows, which is inflows (sales) minus outflows (redemptions) in millions of dollars in gray scaled on the right. The S&P 500 Index is in black with quarterly observations scaled on the left.

Although the bull market in the early 1980s began in August 1982, equity fund flow data begin in 1984. Nevertheless, we see increasing positive flows in 1984, 1985, 1986, and 1987 as the S&P 500 moved higher. The market advance attracted investors, as they apparently gained confidence. There were net outflows in 1988 as investors moved away from equities after the market crash of October 1987. As it happens investors were captivated ...