The stock market is about to be in the longest bull market since World War II if it makes new highs and stays there in the next few weeks, demonstrated in the chart below

Source: Twitter @RyanDetrick

The total gains from this bull market have been much lower than the gains in the 1990s bull market which it is about to pass in length. This bull market has been following the mantra “slow and steady wins the race.” Because this bull run has lasted so long, there is a graveyard filled with poor projections and calls for a crash to come.

The calls for this cycle to end were the loudest in 2012 during the European sovereign debt crisis and during 2016 after the energy markets were roiled, the manufacturing sector pulled down the American economy, and emerging markets cratered. Ever since the cyclical recovery started in mid-2016 the only strong calls for this expansion to end have been based on the idea that bull markets die of old age. That has proven to be faulty analysis as there needs to be a catalyst for a recession and bear market to occur.

GDP Per Labor Participant

Real GDP per capita grew 2.2% per year from 1955 to 2007 and then only 1.6% since 2010. As of Q2 2018, the economy is still 16% below its previous trend line which is a big gap considering this is about to be the longest expansion in over 100 years. You can look at the gap in real GDP growth per capita in two ways. You can say it shows the economy never recovered and is therefore in a vegetative state where it fails to follow the previous trend. You can also say growth below the trend line means the economy still has room to expand. The streak of decades of growth following along the trendline would be broken if this cycle doesn’t expand at a quicker rate and avoid a recession.

Interestingly, it’s possible both those options are wrong because they follow along a false premise. GDP per capita is more of an ‘apples to apples’ comparison than just looking at GDP, but it doesn’t go far enough. Because America is getting older and fewer young people are working, the labor force participation rate has cratered. Therefore, it’s best to compare the average GDP growth on a per labor force participant basis.

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