What Kind Of Market Are We In.
This from the "Big Picture" today. {Excerpt}
Over the past month, I have heard quite a few people declare this to be the start of a new bull market. The kindest thing I can say in response to that is the jury remains out, with the weight of the evidence inconclusive.
In terms of historical analogies, investors should be asking themselves: Is this move is more like 1982 or 1974?
Consider: 1982 marked the end of a 16 year, secular bear market, which saw the Dow finally get over 1,000 on a permanent basis. It kissed that level in 1966, and again a few more times prior to breaching that level for good. 16 year nominal returns were zero, but on a real (inflation adjusted) basis buy & hold investors lost nearly 90% of the purchasing power.
At the beginning of that Bull market, equities were despised, bond yields were high and P/E ratios were single digits. History does not repeat precisely, but there is usually a rhyme involved.
I have noted in the past that following major bull runs, markets often have a major refractory period, wherein it takes years to work off the excesses of the prior period. Even in that period, markets will get deeply oversold and rally, and deeply overbought and sell off.The current secular bear is no different.......
In terms of historical analogies, investors should be asking themselves: Is this move is more like 1982 or 1974?
Consider: 1982 marked the end of a 16 year, secular bear market, which saw the Dow finally get over 1,000 on a permanent basis. It kissed that level in 1966, and again a few more times prior to breaching that level for good. 16 year nominal returns were zero, but on a real (inflation adjusted) basis buy & hold investors lost nearly 90% of the purchasing power.
At the beginning of that Bull market, equities were despised, bond yields were high and P/E ratios were single digits. History does not repeat precisely, but there is usually a rhyme involved.
I have noted in the past that following major bull runs, markets often have a major refractory period, wherein it takes years to work off the excesses of the prior period. Even in that period, markets will get deeply oversold and rally, and deeply overbought and sell off.The current secular bear is no different.......
My thoughts: I'm going to write a longer piece soon (when I have some time) about the dangers of using past markets and comparing them to today. But I'll leave it with two quick points: 1. History never repeats itself and 2. the danger of looking at the past is that we make the assumption that because events turned out a certain way, they had to turn out that way. This is invariably a false assumption.
*Long ETFs related to the Dow Jones Industrial Average and the S&P 500.
posted by CR English at 8:28 AM
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