Catalysts That Ended Prior Bull Markets

The current bull market is only months away from becoming the longest in modern history, in fact if the market holds together through to September 2018, we will have crossed that mark. As we approach this “milestone” we thought it would be useful to reflect on the some of the other 11 bull markets that have occurred since WWII, paying particular attention to 6 of them, and importantly what was perceived to have caused their demise.

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U.S. Pharmacy Retailers, Mauled By The Amazon

In this increasingly connected world where any product is available at any time through an online offering rather than a traditional brick-and mortar store, it seems impossible to think there could be a $270 billion industry that has bucked the trend and gone the other way.

The U.S. pharmacy industry however has done just this, with online (including mail-order) prescriptions undergoing a staggering 33 per cent decrease in market share, falling from 16 per cent of the market in 2009 to just 12 per cent in 2017, with brick-and-mortar taking the difference. Meanwhile in general retail (apparel, shoes, electronics, etc) the trend has been the diametric opposite, with online having increased its market share by ~250 per cent over the same period.

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Search For Yield & The Ballooning Bond Market

The size of the corporate bond market has grown extraordinarily subsequent to the 2008 / 2009 financial crisis, adding ~$4.5 trillion worth of Investment Grade (BBB rated and above) and High Yield debt (BB rated and below) representing an increase of ~150%. Of particular note is the split between BBB (lowest rated Investment Grade debt) and High Yield (junk rated debt). From the chart below it is clear to see there has been an explosion in BBB paper (Investment Grade) largely driven by unprecedented stimulus from central banks, falling credit standards by rating agencies and the market’s relentless search for yield.

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