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Analysis

End of bull market in sight

This month’s advisers network poll focuses on when and how the current bull market might end. Members of the network were asked: ‘Assets globally have benefited from a strong bull market in 2017. When will markets see a correction and what will be the cause?’

Strong asset performance since 2009 has continued well into 2017. This makes the current ‘bull run’, at 8½ years, the second longest on record. Earnings growth, relaxed lending conditions and a gradually expanding economy have combined to create an ideal environment for stock appreciation. Financial history suggests bull markets are not be permanent, and so a correction seems inevitable. However, the timeframe provides widespread debate with anywhere between a year and ten years proposed. Despite this, 70% of our Advisers Network who suggested to us a timeframe agree that a correction will occur in 2018, compared to 30% believing the buoyancy will continue for longer.

How this pullback might occur is also disputed, with causes including the influence of disruptive technology and monetary policy tightening. Underlining the unpredictability of market developments, respondents gave a wide variety of reasons such as a barely forecastable ‘black swan’ event with the escalating crisis in the Gulf cited as potentially jarring the market. Other possible factors include global increases in both inflation and interest rates.

December Infograph

I believe that any overall correction is likely to be short-term due to the strong global underlying economic conditions. With the strengthening of the global upswing in economic activity, global growth is projected by the IMF to increase further to 3.7% in 2018, from 3.6% in 2017. Moreover, globally, monetary policy remains accommodative.
Hemraz Jankee, formerly Bank of Mauritius

The international financial market will face a correction when inflation accelerates in major countries, particularly in Japan, whose inflation risk the market totally neglects. This is unlikely to happen in 2018 unless some incident breaks out in the Gulf.
Akinari Horii, The Canon Institute for Global Studies

Market correction will occur within 12 months and the major causes will be loss of confidence in central bankers and reduced excess central bank liquidity. Regardless of the trigger, the ending of the major features which have driven this extended bull market across virtually all asset classes will characterise a highly correlated downward move across markets.
Colin Robertson, SW1 Consulting

The perceived dangers are the massive indebtedness overhang, the end of quantitative easing, and the political background of Brexit and Trump’s erratic behaviour.
David Suratgar, BMCE Bank International

Higher inflation numbers or wage inflation will start a correction in the US bond and equity markets, potentially next spring. Of course any big geopolitical event could also trigger a correction.
Olivier Rousseau, Fonds de réserve pour les retraites

I expect a correction sometime in 2018, probably toward the latter half of the year. As always, the specific cause is probably impossible to project.
Jeff Frieden, Harvard University

January’s question

Who will stay in office longer: Theresa May, Donald Trump or Angela Merkel?