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The broader stock market has done nothing in 16 months

Scott Gamm

Remember the stock market surge in January 2018, when the S&P 500 ( ^GSPC ) hit 2,873, which was a record high at the time?

Sixteen months later, the stock market is still flirting with those same levels. The S&P 500 Tuesday stood at 2,860. Even when the S&P 500 surged to a new intraday record high on May 1, 2019, of 2,954, that still was only a 2.8% gain from the aforementioned January 2018 level.

While the market has offered plenty of opportunities for traders, especially given the nearly 20% decline in stocks seen during the fourth quarter of 2018, investors who have simply put money into index funds have been forced to accept the range bound nature of the stock market.

“We’re definitely on the local train, making all stops for Fed policy worries and trade war concerns,” said Nick Colas, co-founder of DataTrek Research , adding that the slow churn of stock markets has led investors to allocate money into venture capital and private equity opportunities.

Though the sluggishness of markets doesn’t mean investors should turn into traders, according to Mary Ann Bartels, Bank of America Merrill Lynch’s head of ETF strategy.

“You really have to look at the long-term,” she said. “We do believe we’re in a secular bull market, which have bear markets —and we just had one. But when we’ve studied secular bull markets, we’ve never had two bear markets back-to-back.”

A bear market is defined as a 20% drop from a stock or index’s most recent high. On Dec. 24, 2018, the S&P 500 fell 19.8% from its September 2018 high.

Bartels said we can see multiple 5% pullbacks within a year and an even larger 10% correction, but she still thinks the market has the ability to reach record highs.

Plus, it’s not just about the movements in stock prices. Many stocks pay dividends, which also play an important part in a stock’s total return.

“This environment of a prolonged flattish market is the reason dividend growth trumps index investing,” said David Bahnsen, founder & chief investment officer of The Bahnsen Group and author of The Case for Dividend Growth: Investing in a Post-Crisis World .

“Imagine an S&P of 2,750 – 3,250 for five more years (it is not impossible). It will be gold for high quality companies not dependent on mere P/E expansion.”

Scott Gamm is a reporter at Yahoo Finance. Follow him on Twitter @ScottGamm .

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