It has now been more than three-and-a-half years since the bull market started in October 2022. At that time, inflation was climbing at its fastest rate in fifty years, the Federal Reserve (the central bank that sets interest rates) was raising rates, and ChatGPT had not yet been released to the public. Since then, the S&P 500 — a widely used measure of the U.S. stock market — has more than doubled in value, and the Bloomberg U.S. Aggregate Bond Index (a broad measure of the U.S. bond market) has fully recovered.
While much has changed since then, market concerns and uncertainty continue to appear in the headlines. Every market cycle brings fresh challenges and new questions about whether the basic rules of investing still apply. The reality is that each cycle is different, with its own unique events, innovations, and risks. And yet, the core principles of investing and financial planning have remained steady across decades — and have continued to guide investors in the right direction.
Bull markets climb a wall of worry
Even though global events continue to influence markets, one of the most important things for long-term investors to keep in mind is the overall market cycle. With the market near all-time highs, it is natural to worry about short-term dips or drops. These kinds of short-term declines happen often — the S&P 500 has historically seen four or five drops of 5% or more in any given year, on average.1 While these moments are never comfortable, long-term investing is shaped more by patterns that play out over years and decades. Reacting too quickly to short-term market swings can actually work against investors, leaving them in a poor position relative to their long-term financial goals.
Investors often say that markets climb a "wall of worry" — meaning they tend to rise even when there are plenty of reasons to be concerned. Over the past several years, markets have pushed through high inflation, a banking crisis in 2023, global conflicts, concerns about Federal Reserve policy mistakes, questions about the concentration of AI-related stocks, tariff-driven market swings, and more. None of these concerns were small, and yet through all of them, the market has continued to perform well overall.
The chart above shows this pattern going back to World War II. Over this 70-year period, bull markets (periods when stock prices are rising) have lasted much longer and produced much larger gains than the losses seen during bear markets (periods when prices are falling). Bear markets have typically lasted one to two years on average, while recent bull markets have run as long as ten years or more. Even when market corrections — temporary drops — occur during bull markets, the average decline is 14%, and the average recovery has taken just four months.2
For example, the bull market that followed the 2008 financial crisis lasted nearly eleven years. Despite this, it is often called "the most unloved bull market" because there was a constant stream of worries about the economy and financial markets. Looking back, it is easy to see that even when those concerns were valid — such as the pace of economic recovery or the size of the national debt — they did not justify making major changes to long-term investment plans.
Of course, past performance does not guarantee future results, and how quickly markets recover depends on the specific situation. But the historical record makes it clear that trying to react to every market move has, more often than not, caused investors to miss much of the gains that eventually followed.
A strong economy provides the foundation for long-term investment returns
While the stock market and the broader economy are not the same thing, they are closely connected. Over the long run, stock prices are driven by corporate earnings — the profits companies make — and those profits ultimately depend on how well the economy is doing. That is why it is important to keep an eye on the economic cycle, even as markets move up and down each day for many different reasons.
The current economic expansion has technically been running two-and-a-half years longer than the current bull market. The last official recession — a period of significant economic decline — as determined by the National Bureau of Economic Research, was the brief but sharp downturn caused by the pandemic in 2020. Since then, there have been periods of slower growth and occasional predictions of a recession, but none of those predictions have come true.
Today, the economy looks healthy by many measures, though investors are keeping a close eye on three key areas. First, if oil prices stay above $100 per barrel for an extended period, it could reduce consumer spending and push inflation higher. Second, the job market has slowed noticeably, especially in areas like technology, raising questions about whether consumers will continue to spend at the strong pace seen in recent years. Third, the large scale of investment in artificial intelligence (AI) has led some to ask whether there is a "bubble" forming — meaning prices may be rising beyond what is justified. This concern is understandable, given that many of today’s investors lived through both the dot-com bust in the early 2000s and the housing crisis in 2008.
Bubbles are notoriously hard to identify while they are happening, and history shows that not every period of high valuations (when asset prices appear expensive) ends in a dramatic collapse. So far in this cycle, unlike in some past periods, earnings growth has supported higher valuations, and many companies are funding large investments out of their own profits. For long-term investors, the key is staying diversified — spread across different parts of the market — to benefit from growth while keeping risk in check.
Stocks and bonds continue to complement each other
Every market cycle raises questions about whether the traditional approach to managing a portfolio still makes sense. In 2022, when both stocks and bonds fell at the same time due to rapidly rising inflation and interest rates, some investors questioned whether bonds still had a useful role in a diversified portfolio. Similar doubts arose after the 2008 financial crisis, when bonds delivered low returns due to historically low interest rates.
Over the past few years, bonds have not only recovered but have also started providing meaningful income and helping to balance portfolio risk. The Bloomberg U.S. Aggregate Bond Index has delivered positive returns in each of the past two years, helping to cushion the impact of periods when stocks were more volatile. International stocks and commodities — physical goods like oil or gold — have also contributed, offering additional ways to spread risk.
This pattern is consistent with what history shows across different market cycles. Each period seems to bring a new version of the question: "Is this time different?" when it comes to how different types of investments interact with each other. In the 1970s, high inflation challenged traditional portfolios. During the dot-com era, technology stocks became extremely popular despite many of those companies having little or no profits, making other sectors seem unexciting by comparison. In 2022, rising interest rates put pressure on both stocks and bonds at the same time. Elements of all of these past challenges can be seen today.
Each time, sticking to the principles of diversification — owning a mix of different types of investments — and maintaining a long-term perspective has proven to be the right approach. As uncertainty continues and new headlines cause markets to swing, keeping an eye on the bigger picture is more important than ever.
The bottom line? More than three-and-a-half years into this bull market, the core principles of long-term investing remain as relevant as ever. Markets have consistently rewarded those who maintain balanced portfolios and stay focused on their long-term financial goals.
Footnotes
1. The number of pullbacks is based on S&P 500 index price returns since 1980.
2. The average size of corrections and recovery time are calculated from S&P 500 index total returns, since World War II.