Worried About the Bull Market? Follow This Advice

Shah Gilani|February 23, 2024

When stocks “climb a wall of worry,” it means the market is rising despite real – and perceived – stumbling blocks.

Those same stumbling blocks keep folks from investing.

Right now, stocks are climbing a wall of worry. And many investors are afraid we could see a sudden drop. That’s keeping them from riding this bull. After all, $6 trillion is sitting in money market accounts.

History tells us that’s a huge mistake.

We need only look at the bull market that followed the Great Recession.

The Great Recession lasted from December 2007 to June 2009. It was the longest economic downturn since World War II, which is how it got the name “Great.”

U.S. GDP fell 4.31% from the fourth quarter of 2007 through the second quarter of 2009. Unemployment rose from 5% to 9.5%… and hit 10% in October 2009. Home prices fell 30%, on average.

As tough as the recession was, it was the 2008 financial crisis that upended equity markets, hammering the S&P 500 down by 57%.

These were real stumbling blocks that scared millions of investors out of the market.

But in March 2009, stocks started to rise. Yet hardly anyone trusted what looked like a “dead cat bounce.” The wounds from those real stumbling blocks were still raw… still there… and still ahead.

Stocks climbed over those worries… thanks to the Federal Reserve knocking down rates to near zero. That made bottom fishing a worthwhile risk-reward play for traders.

The markets moved higher on those two steps: central bank monetary easing and cheap stocks.

Thus we got the Great Bull Market… “great” because it ran for 11 years, from March 2009 through February 2020. It launched the S&P 500 a whopping 400.5% higher… but it also had its share of dips and corrections. Nine of those dips ranged from 8% to 20% below the preceding new highs.

All those dips were the result of worries. From the May 2010 “flash crash” to the European banking crisis, from oil prices spiking to $110 a barrel to Brexit and a U.S. credit downgrade.

All of these problems were surmounted… still, millions of worried and scared investors missed out.

They didn’t have to.

I called the bottom of the bear market on March 27, 2009. Sure, I’d been successfully timing market tops and bottoms since the early 1980s… but investors were too scared to listen.

Here’s what every investor needs to understand.

Keep It Simple

When stocks rise 20% off their most recent lows…. we’re in a bull market.

Period.

So keep it simple. Buy stocks in bull markets.

We’re in a bull market until the S&P 500 falls from its most recent highs by 20%.

Then we’re in a bear market (at least according to standard technical analysis and traditional thinking).

But I don’t worry about a bull market turning into a bear market until stocks drop 25% from their most recent highs. For me, a fall from a new high of 10% to 20% is a “correction.” And that’s a buying opportunity in a bull market.

Had you followed this advice… when the market hit bottom March 2009, you would have gotten back in once the S&P 500 got above 800, 20% above the bottom.

Then you’d have been up almost 80% before the first dip in the summer of 2010.

And if you’d stuck to my simple strategy… you would have ridden out all the worrisome dips and corrections throughout the Great Bull Market, none of which exceeded 20%.

That includes the 2010 flash crash, the European banking crisis, Brexit, and the U.S. downgrade.

And if you had continued to stay in… you’d have had close to 400% gain by February 2020.

For the entire bull run, every time I was on Fox Business Network’s Varney and Co. show, and Stuart Varney asked me about every sell-off, I said they were buying opportunities.

That’s why Stuart Varney calls me the “the man who calls it all,” and “the king of dip buying.”

Now, we’re in another bull market. One I called in July 2023 when the S&P was up 20% off its November 2022 lows.

And again, Stuart Varney asked me in late October 2023 – when the market was selling off on “higher for longer” rate fears – if I was still bullish.

I said, “Stuart, we’re only down 10%… this is a buy-the-dip opportunity.”

And here we are, climbing every worry… that the market’s being led by only a few stocks… that there’s no breadth… that the Fed’s not cutting rates… that inflation’s still brewing… that we haven’t had a correction… that we’re “overbought”… that we’re now being led by just one stock (Nvidia)… that the market’s P/E is at a tipping point… and all the other worries stocks and investors have to climb.

So what?!

We’re still in a bull market. Dips are buying opportunities. It’s all good… until it isn’t.

And it isn’t… only when we drop 25% from whatever the next high will be.

Stocks are climbing the wall of worry, and you should be too.

If not… you’re going to miss a hell of a bull run.