Contrarian View: Is the Bull Market Really Just Beginning?

Did the Current Bull Market Really Start in 2013There is some resilience to this stock market, and it’s evidenced by the strength in many important indices.

The Dow Jones Transportation Average is a very important index, even if you don’t own—or aren’t interested in owning—any component companies. The reason for its importance is that it has a track record of leading the rest of the stock market. And it’s especially useful as an indicator of a bull market breakout.

Transportation stocks have a history of leading the economy and the stock market. Dow theory, in my view, is alive and well, and it’s worthwhile to track the index to help with your overall market view.

Lots of commentators view the stock market as having been in a bull market since the March low of 2009. I don’t see it that way.


I view the stock market’s performance since that low (no matter how it was induced) as a recovery market, not the beginning of a new secular bull market or cycle for stocks.

The breakout, from my perspective, was around the beginning of 2013, when institutional investors ignored all the risks (including the inability of policymakers to actually make policy) and decided to bid blue chips and transportation stocks with particular fervor.

The previous stock market cycle was a 13-year recovery cycle from the technology bubble that produced over-the-top capital gains until 2000. The stock market recovered from the massive sell-off only to be hit by the financial crisis and Great Recession.

A long-term chart of the S&P 500 is featured below:

$SPX S&P 500 Large Cap Index Chart

Chart courtesy of

Last year’s stock market performance was genuinely stunning; while the monetary backdrop hadn’t changed, there was a lot of pent up demand. Combined with new cash inflows, the result was exceptional gains in both stable, dividend paying stocks, as well as railroads, airlines, and trucking companies.

Stock market strength in mature transportation businesses, like Union Pacific Corporation (UNP), J.B. Hunt Transport Services, Inc. (NASDAQ/JBHT), and United Parcel Service, Inc. (UPS), is a very important combined gauge on economic activity and investor sentiment.

And because guidance and financial results of these businesses are pretty reliable, institutional investors trade off their business conditions.

Not to be ignored is the very strong price performance of airline stocks. All the airlines that are components of the Dow Jones Transportation Average have been doing really well on the stock market since the beginning of 2013. As they hold up, so will the broader market.

I view 2013’s breakout performance as the beginning of a new cycle in equities, and this is often referred to as a secular bull market.

If this is the case, within a secular bull market for stocks, the U.S. economy can experience another recession and subsequent price correction on the stock market. It can take years to play out, and in the process, it should produce a new business cycle in interest rates.

Regardless, there’s nothing to chase in a market pushing its highs with countless sub-indices, like the Dow Jones Transportation Average and Russell 2000 Index, confirming the primary upward trend.

I would consider booking some profits from speculative positions and building up some cash. The stock market shouldn’t turn unless other important indices do so beforehand.