Just before we went to press, two things were happening in the stock market. First, the S&P 500 index was on the verge of setting a new record high. Secondly, the current bull market was close to becoming the longest ever.

I don’t make the current level of the market a topic in my Editor’s Note very often because I write it a few weeks before anybody outside of our office sees it. Prices can move quickly, and anyone who has had a long career in the investment industry knows Mr. Market is very capable of making your forecast look foolish.

Still, there are reasons for talking about the market now.

There is ongoing debate about whether or not the current bull started in 2011 instead of 2009. During the eurozone debt crisis of 2011, the S&P 500 fell by 19.4% from a closing high to a closing low. A common dividing line between corrections and bear markets is a drop of greater than 20%, but there is no absolute definition of where the border sits.

For the purposes of calculating bull market returns for our approximately 60 stock screening strategies as well as mutual funds and exchange-traded funds (ETFs), we treat the most recent bull market as having started in March 2009 and pausing on January 31, 2018. For the S&P 500 to officially come out of its correction, it has to set a new high. We don’t solely look at the large-cap index when making the decision about when bull and bear markets begin and end. Rather, we consider other indexes as well. If the market continues to trend upward, we’ll likely take our hands of off the pause button, but that decision has not yet been made.

How long the bull has run provides fodder for those writing market commentary. It is an irrelevant factor from the standpoint of managing a portfolio. Bull markets do not die of old age. Rather, something happens to end the upward run: a recession, a crisis, the bursting of a speculative bubble, etc.

This is where having a disciplined and well-thought-out strategy comes into play. Over a lifetime, an investor will experience several bull and bear markets. The prices of stocks will go up and down, as will the prices of bonds, commodities and other assets. You and I can’t influence any of them. All we can do is stay focused on our process and long-term goals. Control what you can control and don’t obsess over the rest.

I believe the written word can help. Even something as simple as just writing down your allocation strategy and the logic behind it can make a big difference. You can see my rationale here.

Speaking of beliefs, 45% of respondents to a recent American Century Investments survey claimed that they intentionally choose to do business with companies whose “values align” with their own. Return on investment still ranked higher in terms of which factors influence their investment decisions (86% for return versus 54% for impact on society), but interest among investors for portfolios reflecting their personal values is growing.

The investment industry has responded by offering a greater number of ESG (environment, social and governance) funds. The idea behind them is to give investors the opportunity to do well by doing good. While the idea is well-intentioned, any time companies are excluded and/or favored for reasons that have nothing to do with their investment characteristics, returns can be sacrificed.

ESG is essentially a form of thematic investing. The same could be said about so-called sin stocks; an investor can make an intentional effort to allocate to them. In our feature article, we discuss how to incorporate such approaches into an actual investing strategy. Though the article focuses on vice and virtue, the insights provided can be applied to other thematic approaches as well.

Wishing you prosperity,

Charles Rotblut, CFA
Editor, AAII Journal
@CharlesRAAII