One of our longstanding themes — that the current environment is a secular Bear market, punctuated by cyclical bulls — gets the full coverage in the WSJ this morning.
“Many investors are now calling the rebound in stocks since early March the start of a new bull market. But it could be only a temporary respite from a longer-term bear market dating back to the beginning of this decade.
If the market is poised for a multiyear run, investors can be more aggressive about diving into stocks. If the bear market will regain its grip on stocks and send prices lower again, investors need to be cautious. Historical data and the still struggling economy seem to point to the latter case, called a cyclical bull market in a secular bear market . . .
In late 2001, Ned Davis Research, a market analysis and money-management firm, raised the idea that stocks had entered a secular bear market, a long period of flat or declining stocks. That idea gained traction last autumn as stocks fell below levels of a decade ago.
Ned Davis considers this the fourth secular bear market since 1900. The last one, from 1966 to 1982, ended when the Federal Reserve moved to aggressively crush inflation. These “secular” cycles run for long periods; secular bull markets have lasted from six to 24 years and bear markets 13 to 16 years. Within those cycles are many more cyclical bulls and bears — nearly three dozen of each since 1900. (Ned Davis uses its own criteria for a cyclical bull or bear market, based largely on 30% moves.)
Is This Bull Cyclical or Secular?
WSJ, June 15, 2009
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