Aging bull celebrates 7th birthday: How much longer can it last?

It's often said that bull markets don’t die of old age. That’s a good thing. Why?  Because the current stock market bull, which was born on March 9, 2009, three months before the official end of the Great Recession, celebrates its 7th birthday Wednesday, a long life only two other bulls have enjoyed.

Still, despite the fact the bull sported a 215% gain back in May when the Standard & Poor's 500 index posted its last closing high – which ranks 5th best of all-time, according to S&P Dow Jones Indices -- and has lived a full 84-month life so far -- about two years longer than the average bull market and the third-longest in history -- the aging bull is showing signs of its age.

“Time to buy the bull an AARP membership,” quips Howard Silverblatt, senior index analyst at S&P Dow Jones Indices.

Year seven hasn’t been a healthy one for the bull, as the S&P 500 has dipped 4.8% since its 6th birthday and after Tuesday's close of 1979.26 is still hovering below the 2000 level, despite closing above that milestone for the first time in August 2014. And while the large-company U.S. stock index has yet to eclipse the 20% drop required to mark an official end to the bull market and usher in a bear market, it did tumble more than 15% at its intraday low back on Feb. 11 and a large number of companies in the index – 212 to be exact – are still down more than 20% from their highs hit since the start of 2015, which means a good chunk of stocks in the index are in bear market territory.

In its prime, the bull racked up some big gains, including a nearly 69% surge in its first year.

The gains, first powered by investors looking to profit from the mega-bounce off the lows after the S&P 500 cratered nearly 57%, were fueled later by the Federal Reserve’s easy-money policies. The U.S. central bank, starting in 2007, pushed down interest rates and borrowing costs to artificially low levels, giving the economy a much-needed boost and lifting it out of recession. The rock-bottom rates also made stocks a more attractive investment compared to other assets, such as low-yielding government bonds.

A seven-year period of zero interest rates, which the Fed ended back in December with its first rate hike in nearly a decade, led to a feeling on Wall Street that stocks were the best place to park cash for investors looking for a decent return. That viewpoint launched the acronym T.I.N.A. , shorthand for “There Is No Alternative” to stocks. The bull run was also fueled by corporate America’s massive purchases of its own stock, a buyback boom that created a major source of fresh demand for stocks and made corporate earnings growth look better as profits were spread around fewer outstanding shares.

So where does the aging bull, which is either mature or old, depending on which Wall Street pro you talk to, go from here? Can it make another new all-time closing high and avoid a 20% top-to-bottom decline by the end of May and surpass the second longest-running  bull that ended back in August 1956, which lasted 85 and half months?

(One caveat: For this bull market to officially show seven years in the record books, it would have to make a new closing high. If not, and it drops 20% or more into a bear market, the official end of the bull market will be the current peak of May 21, 2015 – or just 6 years and two months old, notes Sam Stovall, U.S. equity strategist at S&P Global Market Intelligence. “Should a 20% stumble occur first, this birthday crown will be revoked like Jim Thorpe’s Olympic medals,” Stovall noted in a report. After Tuesday's 1.1% drop, the S&P 500 is currently 7.1% below its record high.)

The current bull, like NHL hockey legend Jaromir Jagr, who is still scoring goals at age 44, could continue to defy skeptics despite graying around its horns, argues Brian Belski, chief investment strategist at BMO Capital Markets.

“This is a stealth bull (that) no one (on Main Street) believes in,” Belski says. “Why is the bull market not over? Because stocks are slightly lower this year and were flat last year. This is the reset and respite that all bull markets have.”

U.S. companies, he adds, are flush with cash and “cash flow drives earnings.” What’s more, Belski says, the economy is improving despite the fact that many Main Street investors “believe a recession is around the corner” due to negative stories in the media. The presidential election, he adds, “is a bump in the road” for stocks.

The bears, of course, keep warning that the end of the bull market is near and that stocks will suffer a steep swoon amid a global economic downturn and the inability of the world’s central bankers to jumpstart growth around the world.

“Prominent bears, who were right in 2007, continue to pound the table against this bull, despite being wrong all these years," Stovall says.

Sure, price-to-earnings ratios, a common valuation metric used by Wall Street, are high relative to long-term averages. But when low inflation and still-low interest rates are factored in, valuations don’t seem so inflated, he adds.

The risk, of course, is if the U.S. economy gets dragged into recession, a slip-up that will likely sound the death-knell for the bull market, Stovall warns.

“Yes, the bull's best days are probably behind us,” Stovall says. “However, even though this bull might not be able to sprint toward the setting sun, we think it has the strength to walk toward it.”

Adam Shell on Twitter: @adamshell.