Even an outright bear market fits into the bull market narrative

It's been a rough couple of days in the global financial markets.

Last week, the S&P 500 tumbled 6%. It was the worst first five trading days in history.

But before you panic and dump everything, it's worth remembering history.

In a note to clients on Friday, BMO's Brian Belski reminded clients that a bout of weakness and volatility fits into the narrative of long-term, secular bull markets. From his note (emphasis hours):

"Based on historical evidence, stocks typically enter a very long period of expansion after convincingly emerging from a period of negative 10-year holding period returns (i.e. a prolonged period of a 5%+ annualized return). We found that, on average, these periods last for roughly 15 years and deliver average annual returns up to about 16%. Given that 10-year holding period returns emerged from negative territory a little over five years ago and currently stand at 5.1%, it is not unreasonable to assume that putting money work today could generate double-digit returns over the next 10 years, in our view. However, it is important to note that the market has entered a secular stage where shorter-term volatility tends picks up, particularly considering how long the market has gone without exhibiting a major correction. Therefore, even if market struggles persist or enter outright "bear market territory" over the near term, we believe it should have no impact for those investors with a longer-term focus."

For folks like Belski, big sell-offs, corrections, and even crashes are just part of the long-term bullish story.

Check out this chart of the current cycle (dotted red line) overlaid with the average trajectories of the last two secular bull markets (solid blue line). Note the big dip in the blue line after year five. That's Oct. 19, 1987, the day the Dow plunged a breathtaking 22% in one day.

BMO Capital

While the risk of a much scarier crash is very real, history shows that it pays to be patient during times like this.