Here's When This Historic Bull Market Will End

Editor's note: Steve Sjuggerud has been bullish on stocks for years.

But he realizes the market won't go straight up forever.

This weekend's Masters Series features an exclusive two-part interview with Steve. In it, he explains how much higher – and how much longer – this bull market can continue...

Here's When This Historic Bull Market Will End
An interview with Steve Sjuggerud, editor, True Wealth Systems

Sam Latter: Regular readers know you've maintained that before the "Melt Down" period, we'll see a "Melt Up," where stocks soar to unimaginable heights.

You recently told your True Wealth Systems readers that during the last melt up in 1998 to 1999, certain tech stocks like Microsoft traded at astronomical valuations of more than 25 times sales. Microsoft has been on a tear over the last year – up almost 40% – but still, it's "only" trading at six times sales today.

With U.S. stocks a chip shot away from new all-time highs, how much higher can this bull market really go?

Steve Sjuggerud: Well, there are two answers to the question. The first has to do with markets in general... and the second has to do with the current Melt Up.

First, I've followed a simple script for years that kept my readers invested in U.S. stocks.

I've said that interest rates would stay lower than anyone thought possible, for longer than anyone thought possible... and as a result, stocks could move higher than anyone imagined.

That has been my framework. And it has been exactly correct so far.

The Federal Reserve began cutting interest rates during the global financial crisis. It also began a money-printing scheme that flooded the system and helped boost the economy. For nearly a decade, the Fed has kept its foot on the gas. And if you look at history, you'll understand the saying, "Don't fight the Fed."

Of course, the Federal Reserve doesn't control the stock market. But it can help push it in a specific direction. If the Fed wants stocks to move higher, why should I argue?

Most of the last decade, the Fed has done everything it could to move stocks higher. So my advice was simple: Stay long!

Sam: But things are changing now, aren't they? The Fed has already started to raise interest rates again.

Steve: That's exactly right. The old script is beginning to change.

In December 2015, the Fed hiked rates for the first time since 2006. It did it again last December, again in March, and once more last month.

It's easing its foot off the gas... but it isn't hitting the brakes.

Over the last few cycles, rate hikes alone didn't kill the bull market. What kills bull markets is when the Fed stops hiking rates. When rates hit a level the Fed thinks is appropriate, rates plateau.

During the last cycle, rates bottomed at 1% in 2003. The Fed then spent 2004 and 2005 hiking rates, which eventually plateaued at 5.25% in 2006.

That flat line in rates is what we have to worry about, based on history... not the actual hiking cycle.

I'll change my tune when we hit the plateau. But we aren't there yet. So while my big-picture thesis is changing, I'm not getting bearish yet. The message isn't to sell.

Based on this idea, the bull market could continue for years... not that I necessarily expect that to happen.

Now, regarding the Melt Up itself... our timeline is likely shorter.

The last great Melt Up was quick. It only lasted 18 months. And based on what's happening now, I'm certain today's Melt Up has already begun.

Sam: When do you think it started?

Steve: It's hard to be certain, but I think investors' mindsets changed after the U.S. presidential election in November.

I don't know if it was because Trump won, or because we finally had some political certainty. But either way, markets rocketed higher and investor fear seemed to fall.

For the first time in years, folks seemed excited about the prospect of owning stocks.

The election happened eight months ago. So we could be nearing the middle of the current Melt Up, based on history. We can't know for sure, obviously... but stocks could peak around this time next year. The exciting thing is that the biggest gains tend to happen at the very end. So we haven't missed it yet.

Sam: Will all sectors of U.S. stocks benefit from the Melt Up?

Steve: No, not all of them. While I do expect the overall market to do well, this isn't a "buy anything" market. Again, let's take a look at how the last Melt Up played out...

During the final boom, the benchmark S&P 500 Index rose nearly 50%. That's nothing to sneeze at. But the tech-heavy Nasdaq rose more than 200%.

Certain sectors didn't participate in the market rally. Health care stocks, for example, were up just 7%. And basic materials stocks were basically flat.

It's unlikely that everything will rise this time around, either. You'll have to figure out which sectors are primed to soar during the final stages of the Melt Up.

Out of fairness to my subscribers, I can't give away all of the details today. But I do think the tech sector will once again be a winner during the Melt Up. And it's already starting to happen...

Again, the tech-heavy Nasdaq has outperformed the broader S&P 500 since November's election. The Nasdaq hasn't crushed the S&P 500... yet. But we could be seeing the beginning of a final push higher.

Sam: How will we be able to tell when the Melt Up has ended? What kinds of signs will suggest that moment has arrived?

Steve: I know readers won't want to hear this, but there won't be a big flashing light when the market peaks.

Any "obvious" signs won't be obvious in real time. Only hindsight will make them seem obvious. But I can tell you how to protect yourself: Follow your trailing stops.

It's really that simple. Our upside is higher during the Melt Up period, but like any investing environment, we use stop losses to protect us on the downside.

So there's no magic answer for knowing exactly when the Melt Up has ended. But if you follow your trailing stops, it won't matter... you'll be protected before the Melt Down crushes your portfolio.

Editor's note: On Thursday night, Steve and Porter hosted a free event where they discussed everything you need to know to profit from the Melt Up... including one actionable recommendation you can use to start making money right away. If you missed it, you can watch a replay right here for an extremely limited time.