It's Been 1,357 Days Without A 10% Market Correction: Time To Sell?

More than six years into the current bull market, the S&P 500 continues to grind higher, tacking on another 3.1 percent gain so far in 2015. With no end in sight for rising share prices, RBC Capital Markets analyst Jonathan Golub recently released a report focusing on what it would take to kill the bull market.

1,357 and counting
Stunningly, not only has the bull market endured for more than six years, the S&P 500 has not experienced even a 10 percent correction in 1,357 days (since October, 2011). When RBC recently released a report that highlighted this market anomaly, the firm received an influx of questions about what investors should be watching for ahead of the next big market dip.

Recessions are the key
Golub says that the most likely bull market killer will be a U.S. economic recession. However, according to RBC’s Recessionary Scorecard, all but one of the firms six economic metrics currently indicate an environment of expansion, not recession.

Yield curve
In the past 45 years, there has not been a single U.S. recession that wasn’t preceded by a yield curve inversion. At the present time, no such inversion can be seen in yield curve chart.


Wage inflation
Historically, the Yield Curve has been the most important of the recession indicators. However, Golub explains that the uniqueness of the current environment makes wage inflation the key metric to watch.

“A sharp pickup in wages would likely cause the Fed to act more quickly, derailing the expansion,” Golub explains.

RBC believes that the Fed would view a 1.0 percent move in wage inflation as a red flag, but current wage growth is nowhere near that level.