Ron Griess of the Chart Store shows this chart of the 3 secular bear markets of the 20th Century, plus the current Bear market, which began at the beginning of the present century:


click for larger graphic

Category: Markets

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16 Responses to “4 Secular Bear Markets”

  1. Cdale_dog says:

    Another 6 years of this up/down, yoyo sh*t really doesn’t sound appealing to me. That being said, until my friends who still swear by the buy-and-hold mentality finally give up, I won’t believe this bear is over.

  2. PeterR says:

    The pink horizontal lines represent about 25 years, which corresponds nicely with The Big Churn (1997-2021) hypothesized in 2001, in the second chart at the link above.

  3. Bruman says:

    I guess the only good news if this is true is that we get to count 2000-2008 as “credit for time served.”

  4. impermanence says:

    “The key to making money in stocks is not to get scared out of them.” —Peter Lynch

    This chart explodes the fairly tales Wall Street loves to tell.

  5. nemo says:

    Well, just 57, 63, maybe 129 months to go until we reach bottom. That should be even more pleasant than the past 108 months.

  6. Trevor says:

    So, it appears that it will take another ~5 years for governments to learn their lessons properly before they clip the wings of nations’ asset/capital strippers?

  7. nemo says:

    And only 155, 181, maybe 242 months to go until we match the March 2000 high again. That’s only 13 to 20 years. A little ahead of ourselves back in 2000, weren’t we?

    Judging from that chart, it’s also questionable how sustainable a match of the March 2000 high will be when we reach it again in 2023 or 2030. In all three cases here a match of the old highs was followed by another big crash within a decade or less.

  8. dvdpenn says:

    Is it the new all-time high in 1929 that keeps us from seeing 3 secular bear markets instead of 4?

    There seems to be an argument that the 1905-1920 bear market was just the left side of a diamond pattern (the 1929-1949 triangle being the right side of it). It would somewhat resemble the shape of the 1962-1982 bear market (non-adjusted).

    Also, how would a deflationary secular bear, during which the CPI was declining, effect the likely shape of the a chart of a CPI adjusted S&P (i.e., largely straight down or largely sideways)?

  9. alamo says:

    Am I reading the import of this chart correctly — that we have been (and currently are) in secular bear markets for roughly 82 of the last 95 years (approximately 86% of the period)?

    Does this mean that the secular bull market interludes (roughly 13/95 years, approximately 14% of the period) are best viewed as abberant, but extraordinarily explosive moments wherein the S&P index managed to rise from roughly 25o to 2000?

    So we only get one (maybe two, if we started early or stayed late) chances in our investing lifetimes to hit the sweet spot of a low in a secular bear markets cycle.

  10. Freestate says:

    The prior secular bear market ending Shiller/Graham p/e’s were much lower than what we have seen so far. For example, the ending p/e in 1920 was 4.78. In 1949 it was 9.07 (but it hit 5.57 in 1932) and in 1982 it was 6.64. The low point so far in this secular bear has been a Shiller p/e of 13.3 and we are at about 19.5 today.

    So let’s just say this cycle ends at p/e of about 9, then you are talking an ending S&P value of around 500. If we hit a p/e of 6.5 then you are talking about the S&P at 360. That would probably cover the expected range of the low point for the S&P in this secualr bear cycle.

    Few people realize how the history of the market is really dominated by these long secular bull and secular bear cycles. Also note that all of the stock market low p/e points and all of the major market declines occur in recessions during secular bear market cycles. This is where virtually all of the major catastrophic stock risk is concentrated – in recessions in secular bear markets. If you simply avoid these periods then your risk/return profile from equity investing is remarkably good. You can be out early and be back in late and do very well.

  11. Bokolis says:

    The end of the first two seems to have come about from transitions from wartime to peacetime economies.

    The third was brought about by deficit spending, which might also be stated as, the onset of the government printing $10T+ and giving it to the super-rich. I’m not sure we can use that trick this time around.

    This one looks more like the second one than either of the others. What’s worse, the US economy is now addicted to war and there would be no transition because there are far fewer people to bring home and far fewer roles for them to fill. We could always send them out to rebuild our infrastructure, but…(dodges a flying Lipton)…that would require more deficit spending…(dodges flying Tetleys)…which is unconscionable because we’ve spent $7T to keep the banks open so that people don’t lose their wage slave existence (snags a Celestial Seasonings and pours a cup).

    It’s also interesting how, on number 2, things didn’t kick into gear until 17 years after the bottom. That’s a long time to evade a steamroller.

  12. da bear says:

    What is interesting is that I can only count 4 secular bull markets. The first is the run-up from 1877 to 1906. The second is the Roaring Twenties secular bull market. The third bull market ran through the Fifties into the mid-Sixties. The fourth ran from 1982 to 2000. So we have only had 4 really good bull markets in 130 years.

    Another severe down turn in stocks could mean that the stock market, in real terms, will be no higher than it was in 1929. If the secular bear market ends basically where it did in 1982 then stocks would be back where they were (in terms of purchasing power) in 1900. Decade To Nowhere? Try CENTURY To Nowhere!

    da bear

  13. Moss says:

    Not a pretty forecast if we go to secular bear market historical P/E levels.
    The carnage will be horrific. This is what Prechter, Janjuah, Edwards, and others are predicting.

  14. Freestate says:

    The pink horizontal arrows on the chart are a little misleading. They just show how long it takes to recover back to the original value. An easier way to think about it is: the secular bull is from trough to peak and the secular bear is from peak to trough.

    This lines up the secular bull and secular bear markets with the underlying economic cycles that actually drive the outcomes. And you find that secular bear markets last an average of about 18 years and secular bull markets are a little shorter at about 16 years. Obviously, there is variation around the averages.

    So we are in a secular bear market a little over half the time. BUT, secular bear markets are investable as long as you avoid recessions. Simple multiple indicator recession signals like Hussman or Kasriel have created are effective at getting you out early and then you can use simple technical analysis to get back in (market moves above 200 day MA and recession is bottoming). Doing that provides good equity returns but you still will only be invested about 50-60% of the time in a secular bear market.

    This used to be a lot easier when employment and GDP moved in synch. This secular bear market is more difficult. But the whole trick is to avoid the catastrophic losses.

  15. The worst part is that the boomers, with the many of the market assets in their possesion, haven’t even started exiting the workforce and cashing out yet. Plus, if you add all of the USG deficit spending that has to be digested over the next decade or so I can’t see this bear market playing out naturally. Not even a war will help because the biggest burden is the boomer group and they are too old to send to their deaths

  16. Mike C says:

    The worst part is that the boomers, with the many of the market assets in their possesion, haven’t even started exiting the workforce and cashing out yet.

    Here is a link to a paper that explains that the secular expansion and contraction of P/E multiples (which is what drives the secular bull and bear market cycles) is driven by demographic, the ratio of middle to young:

    If you are 60-65 and still holding most of your investment portfolio in stocks I think you are sh*t out of luck. You missed your chance to cash out at just absurd P/Es from 98-00. If you are young (I’m 36) then the name of the game is just patience. I think we’ll have a traders market for the next several years, and according to the MY ratio a final bottom around 2018. Then it is back to “buy and hold”. According to the MY ratio the next peak should be around 2030+. I just hope some dopes are willing to pay 30-50x earnings for my stocks when I am 55-60.