What would a 20-year bull market look like?

In March 2019, this bull market celebrated its 10th birthday and now sits a whisper below its all-time high. Born from the financial crisis in March 2009, the S&P has delivered a staggering total return north of 400% to investors.

And although this bull market is elderly by historical standards and is still more than two years away from being the longest bull market on record, ask yourself: What would a 20-year bull market look like?

Current 10-Year Bull Market

Before we answer that question, let’s keep some perspective on the current bull market:

• The markets dropped about 60% during the financial crisis and then the bull came out of the gates fast, jumping 37% in the first two months and 69% in its first year
• Its best calendar year was 2013 when it gained 32.4%, followed by 2009 (+26.5%) and 2017 (+21.8%)
• 2018 was its weakest year (down 4.4%), breaking its streak of nine straight positive years
• This 10-year bull has grown by an average rate of 17.7% per year

For perspective, the long-term average annual return of the stock market has been roughly 10%.

Average 401(k) Balances by Age

It should not surprise you that 401(k) balances increase with age. Below are the numbers from Fidelity’s retirement study:

• Ages 20-29: Average 401(k) balance: $11,600
• Ages 30-39: Average 401(k) balance: $43,600
• Ages 40-49: Average 401(k) balance: $106,200
• Ages 50-59: Average 401(k) balance: $179,100
• Ages 60-69: Average 401(k) balance: $198,600

What Does a 20-Year Bull Market Do?

Let’s have some fun and assume that this bull market grows by 12% per year – which is considerably less than its current 10-year run of 17.7% per year and slightly more than the 10% long-term average annual return of the market.

And to make it more real, let’s assume that $500 per month is added – which is incidentally about 1/3 of the maximum annual allowance of $19,000 per year for 2019, up from $18,500.

Note that if you are 50 and over and looking to add more, the catch-up contributions will remain the same for 2019, allowing you to add an additional $6,000 to your 401(k).

Although we will all be a decade older, here are what those average account balances would grow to if we enjoyed 10 more years of this bull market:

• Ages 20-29: Ending 401(k) balance: $148,045.72
• Ages 30-39: Ending 401(k) balance: $247,432.94
• Ages 40-49: Ending 401(k) balance: $441,858.98
• Ages 50-59: Ending 401(k) balance: $668,275.41
• Ages 60-69: Average 401(k) balance: $728,839.21

Of course, this is for illustrative purposes only and does not include pesky items like fees, taxes and inflation.

What Else can We Expect in a 20-Year Bull Market?

Let’s examine the most recent 10-year bull so that we remember that even if it grows into a 20-year bull, it won’t be a straight line up. Consider that this bull:

• Has delivered six 10% corrections, with the largest coming late last year (down 19.8%) and in 2011 (down 9.4%)
• It went nearly four years without a 10% correction (2011-2015) and 2017's largest intra-year decline was a paltry 2.8%
• Generally speaking, drops of 10% in the S&P 500 occur about once per calendar year

Is a 20-year Bull Realistic?

The short answer is: no one knows. Repeat that out loud: nobody knows.

But, history does consistently show us that bull markets are fueled by the fundamental combination of economic growth, rising corporate profits, and favorable interest rates – all of which mostly exist in the current environment.

Corporate earnings are slowing, but are still strong, consumer optimism is solid, interest rates are favorable, and unemployment numbers are at 50-year lows. That doesn’t mean everything is rosy, however. In fact, there are still plenty of global and political risks to worry about.

This is why we look at your asset allocation every year (or when you have had a significant life change).

With advances in certain asset classes and declines in others, we need to make sure your asset allocation is aligned with your goals and risk tolerance.

And no matter where your current 401(k) balance resides today, make sure you and your financial advisor explore what a 20-year bull market might do for your goals.