While many believe this to be one of the longest bull runs on record with the stock markets reaching ever-higher levels, it is actually one of the weakest historically.
Looking back on US market data to 1871, Kleinwort Hambros noted that the current expansion is only the fifth-longest bull market in history.
The history of the US markets containing all the Bull and Bear markets since 1871
Source: Kleinwort Hambros
Chief market strategist Fahad Kamal said: “If you look at it just in terms of length, basically there are four bull markets that have been longer than the one that we’re in right now, okay?
“And if you look in terms of the magnitude of return, this 287.3 per cent is the fifth-highest.
“So, it’s not by any means whichever way you look at it, in sort of record-breaking territory. There’ve been bull markets that have lasted longer, they’ve been bull markets that have returned a lot more."
The strategist added: “But looking at any single bull market in terms of months is really like judging a book based on the number of words that it has. It just doesn’t tell you anything about it, it’s quality, the reasons for why it’s going on, etc.”
Whilst it has been no record-breaking cycle Kamal adds that no one can be sure when it will end, even if the general consensus is that we are in the late stages of this current bull market.
“By our best assessments we don’t think that we are heading towards an imminent sort of collapse because multiples while they’re stretched, they’re certainly not in dangerous territory yet,” he said. “But they’re heading there.”
If we look at the main market indicators on the economic dashboard: growth, unemployment and inflation we see a market in an apparently negative state according to chief investment officer Mouhammed Choukeir, especially when considering growth.
“If you look at growth, that’s been softening,” said Choukeir. “The leading indicators would suggest that’s likely to continue.
“In fact, if you look at European growth, especially in Germany with the leading indicators they’re collapsing.
“And the EU could be facing a recession if you look at the leading indicators. But that’s the same for the UK and even maybe the US. So, on growth, it’s not that great.”
But things are not actually as bad as they seem in Choukeir’s opinion, especially when considering the impact of the US-China trade war on the EU and other international markets.
The trade war has been an ongoing macroeconomic concern for markets since it flared up last year.
The tit-for-tat tariffs are the latest part of the political dispute between US president Donald Trump – who criticised Barack Obama’s trade stance to China before he took office – and Chinese leader Xi Jinping.
With the IMF warning earlier this year that such a tariff war could significantly weaken the global economy – one which was already experiencing a slowed economic growth – the natural, immediate response was one of concern, according to Kamal.
But in fact, the EU and other international economies could be set to benefit from the trade battle.
Export gains resulting from US and Chinese tariffs
Source: Kleinwort Hambros
In fact, research by Kleinwort Hambros shows that the EU could benefit from an increase of $71bn worth of export increases. And Brazil as another example which could gain $11bn in exports.
“That’s the easy example that we’ve got,” said the strategist. “China’s biggest import from the US has been soybeans, and the second-biggest producer of soybeans in the world is Brazil.
“China cannot produce them on their own, so it’s not that they’re going to develop an indigenous soybean industry overnight or anything.
“So all of a sudden, they’ve got to buy them somewhere and they’re going to come from Brazil, and they’re going to end up buying them at a higher price because the US is the most competitive in the world. But fine, but then all of a sudden, Brazil gets a huge windfall in that sense.”
And added to that the biggest losers are the US and China themselves.
“So, ironically the ones who lose most in the trade war are the US and China themselves, but other people tend to win, at least in terms of terms of exports,” he added.
The negative impact of the loss of their export trade is already being felt in some Asian countries with Singapore reporting a fall in its exports of 3.4 per cent for the second month in a row. But this is only increasing the likelihoods of a resolution, according to the chief market strategist.
But, if a new deal isn’t struck, Kamal said that it will not be unlimited benefits for the rest of the global markets and that it could turn against them very quickly into new trade wars.
“For us, this is a worst-case scenario where these tariffs extend to all imports,” he said. “Then you would start getting the second-order effects where, all of a sudden, the Chinese have a bunch of machines that they can’t sell anymore because the market used to be the US, so what do they do?
“They start dumping them on European markets and the Europeans start raising their own tariffs because they’ve all sudden got all this dumping from China and then the Chinese retaliate with raising their tariffs.”
He added: “All of a sudden, tariff barriers start coming up everywhere, and there’s a race to the bottom.”
Staying on the theme of China’s economic situation and Kamal added another contrarian view that the current slowdown is actually a good thing.
The Chinese economy had been on a steady slowdown for the past 10 years, he said, previously growing at 6 per cent Kamal acknowledged that this was an achievement for such a massive economy.
“The Chinese economy growing at 6 per cent for two years, adds the entire economy of Brazil on to it,” he said. “It’s a humongous machine that’s still growing and the fact that it’s slowing down is actually quite healthy.”
However, it is now entering “a normal maturation process”.
It would be more concerning if they had pushed to grow their economy by 7 per cent no matter what, a practice that the Chinese government has been criticised for.
“The markets are in a good place, it is not an environment to be fearful,” he said. “This is not an environment to think, while there are lots of risks that one needs to worry about.
“Now, that doesn’t mean to say that it’s completely a risk-free environment, there always will be risks. But there are lots of things that are supporting this bull market.”