When will the third longest bull market ever die in Wall Street history?

The current Wall Street bull market has become nothing short of the third longest in history by accumulated profitability. From the lows set on March 9, 2009, the S & P 500 has revalued more than 270%, from the 666 to the 2,500 points in which it moves now.

This spectacular rise has allowed the main stock index in the world to surpass the 266% revaluation achieved in the bull market that took place between 1949 and 1956. An impressive record that very few could anticipate in that month of March, but that finally has materialized.

However, these impressive data also provide reasons for concern. The largest bull market in history took place over 10 years, between 1990 and 2000, with profits exceeding 400% for the S & P 500; and ended with the explosion of the technological bubble and the crisis of the dot.com.

Wall Street's second-largest bull market generated returns in excess of 300 percent, but ran from 1932 to 1937, just after the Great Depression and before World War II. The questions are obvious: how will this bull market end and when will a new bear market begin? No one knows for sure, but after eight-and-a-half years of uninterrupted earnings for US equities history says it expects sooner rather than later.

Market consensus often coincides with bearish markets occurring as investors begin to anticipate an economic recession, something that is not yet visible on the horizon. Job creation in the United States remains solid and economic growth is moderate but continued. And for the moment, inflation remains under control, although its evolution remains a mystery even for Fed Chairman Janet Yellen.

The biggest risk, perhaps, is that the Federal Reserve itself has embarked on the process of monetary tightening. Interest is at 1% -1.25%, but the Fed has already anticipated that it will rise again in December and foresee another three increases in 2018. In addition, it has announced that it will begin to reduce its balance sheet in October. The great age of liquidity and free money comes to an end. And this is where problems often begin, even though they have not yet come to light.

HIGH RISK

In a report released this week, experts at Goldman Sachs, one of America's most influential investment banks, wonder if it is possible to predict or anticipate bear markets. "The current bull market is one of the most durable and strongest in history and investors are increasingly focused on whether a bear market is imminent and whether it really is predictable," they say.

"Overall," says Goldman, "the bear market risk indicator is at 67%, suggesting that the risk of it occurring is high"
These experts identify five factors that, in combination, provide reasonable guidance for measuring the risk of a bear market: valuation, inflation, unemployment, evolution of service sector and manufacturing activity indicators ISM and bond yield curve of the Treasury.

"Overall," says Goldman, "the bear market risk indicator is at 67%, suggesting that the risk of it occurring is high." In his view, the market "is expensive and profit margins at record levels." In addition, they point out that the Fed's monetary policy will continue to tighten.

However, they add that these risks are mitigated in part by the smaller structural inflation, accommodative guidance on interest provided by the Federal Reserve and a lack of financial imbalances in the banking sector.

WAITING FOR INFLATION

Since the analysis firm Pantheon Macroeconomics provide an interesting insight. In his view, the impact of hurricanes on the economy will be transitory and the unemployment rate will continue to decline to 4% early next year.

His fear is that US financial conditions will harden aggressively in a short period of time if investors believe that inflation will not be a problem
This will trigger additional inflationary pressures on wages, which will keep the monthly growth of the underlying inflation rate at 0.2%, which will force the Federal Reserve to continue raising interest rates. "No one at the Fed wants to see unemployment below 4%, because the United States has not been able to sustain these rates in the past without significant inflationary pressure," they say.

In his view, there is a high risk that the market will not lend credibility to the Fed's forecasts of raising interest rates six or seven times by the end of 2019. "If the gap between market expectations and the Fed's expectations increases, there will be a clear correction in the stock markets and a rebound in the dollar, "they say.

His fear is that "financial conditions in the US will tighten aggressively in a short period of time if investors continue to believe that inflation will not be a problem in the future." "We can not say that this will be the case, but we are sure that the risk is greater than the market is discounting right now," they warn.

MINOR EXPECTED RETURNS

Robeco Investment Director Lukas Daalder says they have lowered their outlook for most assets and are anticipating volatility in the future. "This sounds worse than it really is: the weighted returns from a well-diversified portfolio will only be slightly reduced," he says.

The current bull market will die when the market begins to anticipate a recession in the US, if there is a war or if a bubble
In his view, financial markets are entering a "maturity phase within their cycle", propitiated by the withdrawal of stimulus from central banks. According to their forecasts, "this will lead to a decrease in the profitability of risky assets, in part due to the arrival of an inevitable recession." According to the National Bureau of Economic Research, which measures US economic cycles, the country has been in economic expansion since June 2009, the third longest cycle since the mid-nineteenth century.

Goldman Sachs explains that there are three types of bear markets. Cyclics are the most common and occur precisely because of economic recessions. They usually register falls of 30% and last about 26 months on average. In addition, it takes them about four years to recover their previous maximum.

Other types of bear markets are those caused by external shocks such as wars. They are shorter and less severe and usually fall by 26% for seven months. In addition, it takes about 11 months to recover their previous maximum. Finally, structural bear markets, caused by asset bubbles or financial imbalances, are the most severe. They can cause 50% falls, last between three and four years and take a decade to regain their previous maximum.

In conclusion, the current bull market will die as the market begins to anticipate a recession in the United States. It may also end if there is an external shock as a war conflict (the fear of many investors is the growing tension with North Korea) or if a bubble explodes in the price of some asset, as in 2007 with subprime mortgages, . Meanwhile, Wall Street continues marking historical maximum after historical maximum. As a curiosity, the Dow Jones has set records 42 times in 2017. In 1995, it did so in 69 occasions. Will he be able to overcome that record as well?

Forex Market Regulation: Why and How?

The forex market (FX) is the largest and most liquid market in the world, with about $ 5300 million traded daily. Day trading is quite common among forex traders, but most investors depend on the creation of trading accounts and the execution of their trades through the Forex brokers.

There are hundreds of Forex brokers and new brokers constantly open their doors to the public. This makes it difficult to choose the best broker and leaves traders at the mercy of the broker when it comes to honesty and transparency. Despite its enormous size, regulation in the Forex market is scarce and there is not a single global body to monitor it 24/7.

There are no accurate statistics, but the number of forex brokers and binary options that work under a regulatory authority is minimal (an estimated 5 percent) and that gives many companies the ability to take advantage of their clients and engage in abusive practices without consequences.

The Risk of Non-Regulation

For forex retail traders, the biggest disadvantage of the lack of regulation of the forex market of most brokers is the illegal activity or absolute fraud, as well as losses in a market increasingly dominated by speculative activity and the great institutions.

After a series of scams related to the forex market during the period between 2001 and 2008, the CFTC created a special working group to deal with the problem and introduced tight forex regulations several years later to protect retail traders currency.

Under the Commodity Trade Act (CEA), the CFTC assumed jurisdiction over leveraged Forex transactions offered to retail customers in the United States. This Act only allows regulated entities to act as counterparties to forex transactions with US retail clients and requires all forex brokers in the United States online to be registered and comply with the strict financial rules applied by the National Futures Association (NFA).

At the institutional level, banks, which are responsible for 95 percent of the daily currency trade, are heavily regulated. The US Federal Reserve and the US Treasury Department are very attentive to the regulation of the Forex industry and carefully monitor brokers for evidence of manipulation.

Forex Regulation: Why?

Why is Forex regulation so important? The aim of regulation is to ensure fair and ethical business behavior. Under current regulatory contracts, all forex brokers, investment banks and signal traders are required to operate in strict compliance with the rules and regulations set by forex regulators or their activities may be considered illegal. These agencies must be registered and authorized in the country where they base their operations, which ensures that the quality control standards are met. Brokerage houses are subject to audits, reviews and periodic assessments that force them to maintain industry standards. In addition, regulated Forex brokers must maintain a sufficient amount of funds to be able to execute and complete the currency contracts made by their clients and also to return the funds of the clients in case of bankruptcy.

If a regulator finds a broker in violation of its guidelines, it can use a wide range of powers - criminal, civil and regulatory - to protect consumers and take action against companies or individuals that do not meet acceptable standards.

It can publish notices that are important to ensure the transparency of the decision taken by the authority and inform the public, thus maximizing the deterrent effect of enforcement action.

Some regulators issue alerts on financial services companies and individuals both abroad and in their local areas.

Of course, there can be no assurance that any action taken by a regulatory agency, such as the FCA in the United Kingdom, will result in payment or refund of funds or securities, even when formal disciplinary action is taken and sanctions are imposed.

Many of the measures taken by regulatory agencies against brokers covered by their authorities may also apply to unregulated brokers who find themselves in similar situations by the police and other coercive agencies, but their mandate is limited and less likely that is imposed, thus leaving investors with few resources in case of fraudulent practices.

Forex regulators operate within their own jurisdictions, but often work together to look for suspicious activity. In fact, in the European Union, a single Member State license covers the entire continent.

Over the years, regulators around the world have tried to organize some sort of universal regulatory body. The MiFID (Financial Instruments Markets) Directive was introduced in the United Kingdom in 2007 and has been the cornerstone of Europe's financial regulation regime ever since.

The MiFID Regulation is being revised to improve the functioning of financial markets in the wake of the financial crisis and to strengthen investor protection. The changes came into force on 3 January 2017, although discussions are being held between the European Commission, the European Parliament and the Council of the European Union on the possibility of delaying implementation. The new legislation is known as MiFID II and includes a revised MiFID and a new Financial Instruments Market Regulation (MiFIR).

There are, however, powerful voices working to exert pressure for the wholesale forex market to have a broad regulatory base. The European Financial Markets Association (AFME), a body in the sector, has opposed the strict rules of MIFID II and has recently published a document stressing that "unforeseen consequences" could lead to excessive regulation of the Forex sector that would prevent brokers from serving their traders comfortably.

Small and simple rules to follow in Forex

There are some simple and practical rules to keep in mind when investing in Forex. The largest and most liquid market in the world has its own rules that we must understand in order to operate successfully.

A small investor must take into account some of these simple aspects to be able to increase the success of your investment in a few weeks, yes, you must have good information and be constant in the study and analysis of the market.

Small rules to follow in Forex

Currencies are what mark the success or failure of our investment in the Forex market. Currency pairs will only move us to good results when we can trade a pair of currencies in which equilibrium reigns, that is, a strong currency versus a weak currency. In order to choose them, it will be necessary to consult the market trends so as to proceed with more success in our choice.

Although Forex works with currency pairs, each currency is traded separately. Coin pairs consist of a base and a secondary coin. When making technical analyzes of the currency pair you have chosen, it is important to do them individually to detect the possible risk points of each currency, and where their strengths and weaknesses are found, in order to be able to act quickly and consistent in our operations.

Learn and study Forex indicators. Many investors have failed to reach their targets because they did not know the basic construction of a pair of currencies. It is not difficult to access Forex trading, the tricky thing is to stay in a profit and loss equilibrium, where the balance inclines more to the first than to the second.

Pros and Cons of Investing in Forex

There are pros and cons in the Forex. Despite being the biggest market in the world and moving so much money in it on a daily basis, there are aspects that you must take into account when starting.

• The Forex market is the largest and the most liquid in the world, but it is also a very volatile market, so if you are sufficiently prepared, you are likely to receive significant losses in few trades.
• To participate in the Forex market you need to access through a broker, who is the intermediary between your money and the market. Be sure to choose a good broker that is regulated and with which you understand well, that is, have a good customer service and an easy to use platform.
• In the Forex you can earn a lot of money in a short time, but also lose it at the same speed. They are the consequences of the great volatility of the market.
• Do not invest in Forex if you have some risk aversion, surely it will not be your type of investment.
• Unlike stock investing where you can choose hundreds of stocks to invest in, you will only trade with a few currency pairs.
• You can sell and buy 24 hours a day through the electronic platforms, which gives you a lot of flexibility when it comes to trading, but you can also get obsessed if you're not prepared enough.

Market maker and ECN: types of brokers in Forex.

A very important aspect in investing in Forex is the choice of a good broker, because depending on whether we choose a broker or another, we can turn our daily trading into a quiet operation or a real hell.

Differences between Market Maker and ECN

There are 2 types of brokers:" the market maker and the ECN".

On the one hand, brokers Market Maker, or brokers with trading desk, are brokers in which transactions with the purchase and sale of currencies are not made directly on the exchange market, but remain on the work table of the broker.

These brokers make an internal market for their clients, in which all the transactions they make, are married to each other, in fact, the same broker can make counterpart in the operations of its clients. This type of broker, by its way of operating, can create conflicts of interest between the broker and its customers.

The advantages of these types of brokers is that they allow you to open an account with fewer resources, its platforms are easier to use and allow you to do more leverage.

ECN brokers are "no dealing desk" brokers, that is, they allow their clients' orders to interact with one another. They provide a kind of market where they allow all participants: banks, brokers market makers or individual operators to operate against each other by sending very competitive purchase and sale prices within the system.

Participants within this market system get the best quotes available at any given time.

Your profits are always commissions. There is no conflict of interest and participants can operate freely.