Everyone is wondering when this bull market will come to an end.

Tomorrow? Next week? Next month?

After last week’s carnage, you might be thinking: soon.

People are in the news predicting its demise or its survival.

Join the discussion. Pick one.

A friend scoffed when I told him I was writing about Paul Schatz calling a few weeks back for a possible mini-correction.

That’s because the stock market always, always, always reverses itself — by a little or a lot.

Yet I am a firm believer that the more information that’s out there, the better. Let people read, think, decide for themselves.

Schatz is chief investment officer of Heritage Capital, a Connecticut-based investment firm. He thinks the fundamentals underlying the current bull market — strong corporate earnings, low unemployment, strong economic growth — will remain well into next year.


But he sees some signs that suggested the Dow Jones industrial average might have a steep and quick decline.

“If it comes, it’s a short-term pullback in an ongoing bull market,” Schatz said. “Any weakness we get remains a buying opportunity.”

He sees the 30-stock composite Dow, which has been bouncing near all-time highs in the 26,500 range, still hitting 30,000 by the Fourth of July.

In the meantime, he anticipated “some kind of mid- to-upper-single-digit pullback in stocks.”

Schatz has a quantitative model that I don’t quite understand, which is why he is the guy who invests money and I am the one who writes about it.

“I need five closes above 27,000,” he said, referring to the Dow. “Once it closes above 27,000 for five straight days, the next high will be 30,000.”


Why the pullback?

“The reasons behind it are never apparent ahead of time,” he said. “And it’s never the obvious one. The reason this window is open is what’s been going on beneath the surface of the stock markets.”


Schatz said about 10 to 15 percent of the Russell 1000 Index, considered a bellwether for large-cap stocks, are trading in a bear market. That means they are cheap.

He is talking about General Electric, Ford Motor, General Mills, AT&T and some utilities, banks and home builders. These are large, older companies that tend to pay big dividends but at the moment are unappreciated by investors. Many are called value stocks.

The current bull market has been underpinned by growth companies such as Facebook, Netflix, Amazon.com (whose founder, Jeffrey P. Bezos, owns The Washington Post) and Google parent Alphabet.


Schatz sees a split between supercharged growth and lagging-value stocks that he calls “unhealthy.”

“You have a surge in the number of stocks making new highs, and a surge in stocks making new lows,” he said. He was not sure why there is a split, but he sees it as a possible cause for a sell-off.


There are other signs, big and small, that portend a sudden pullback. The Dow has taken over leadership of the markets, making new highs ahead of the other, broader indexes such as the S&P 400 (full of midsize stocks) and the Russell 2000 Index small caps.

That means the gains are concentrated in a somewhat smaller sample size.

“To use a military analogy: The generals have continued into battle, but the troops have all died,” Schatz said.


Just looking at the Dow, which is the most popular barometer, doesn’t tell the full story.

“I look at the number of stocks going up and the number going down every day,” he said. “During the second and third quarters of this year, most stocks were going up on most days. Now that has turned around. For the past month, you have seen more stocks going down than going up.”


Under Schatz’s calculations, the conditions for a pullback will last only about a month to five weeks.

“How do you know you’re right or not? Obviously, if stocks go down, I’m right,” he said. “If they don’t, I’m wrong.”

Jason Thomas, chief economist with the Carlyle Group, doesn’t see a serious pullback anytime soon.


“The slow pace of growth in this expansion reflects the lack of obvious excesses,” Thomas said. “As a result, the next recession could be further off than people suspect.”

I asked Ed Yardeni, president of Yardeni Research, for his take.

Yardeni phoned me while he was making the rounds of clients on the West Coast.

“They are fully invested but nervous,” Yardeni said. “They’re nervous that the business cycle is about to make a big comeback. With the labor market being so tight, they worry that wage inflation will suddenly spike up.”


Even with the sell-off, Yardeni expects the bull market will charge ahead.

“If all it is is a single-digit sell-off, I wouldn’t worry about that very much and just stay with a bullish market,” Yardeni said. “The problem with predicting a sell-off is you also have to predict when to get back in.”

Yardeni said he does not see anything convincing out there that a recession is imminent.

“This expansion could be the longest one once it crosses July of next year,” he said. “It could continue into 2020. Until I see more compelling evidence, I’m staying bullish.”