But at almost 9 years old, this bull market now stands as the second longest in modern stock market history, which means it may not have much further to run. (The longest bull market, which lasted through the 1990s, ended in early 2000 with the dotcom implosion and a 21⁄2-year bear market.)
“This is definitely a mature market, as well as a mature economy,” says James Stack, president of InvesTech Research in Whitefish, Mont., who tracks market history. “It’s time to be more defensive.”
Of course, no one can accurately predict when the bull market will end. Stocks may continue to rise, buoyed by a strong economy and corporate earnings growth. But even the most powerful rally eventually runs out of steam, and history shows that a political or economic shock could trigger a correction or even a bear market.
It is clear that the rally has pushed up stock prices to lofty levels. The S&P 500 recently traded at about 24.6 times corporate earnings for the past 12 months, which is far higher than the historical average of 17.
“Given those high stock valuations, investors are less likely to see big gains ahead, unless corporate earnings can close that gap,” says Stack. “And an expensive stock market means the next bear market may result in more severe losses.”
Before that happens, make sure your finances can weather a market drop, especially if you are in or near retirement, with less time to bounce back from losses. Don’t abandon stocks altogether, though, because you need to own equities for long-term growth. But consider making a few tweaks to your portfolio, and perhaps even taking some profits, if only to sleep better at night. Here are five moves that may help you ride out a downturn:
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