Since we discussed the psychology of longer term cycles this morning, let’s step back see how they look over the long haul, via The Chart Store.

When you look at the individual bear markets (charts 2-5) think about what some of these long slogs do to investor sentiment and psychology:




More charts/cycles after the jump:



All charts courtesy of The Chart Store.

Category: Markets

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

15 Responses to “Long Term Secular Cycles on S&P”

  1. dead hobo says:

    The average person wants to feel the stock market is just another form of savings account. They will accept volatility IF and only IF their only penalty is waiting a while to get their money back if it goes down.

    Asset bubbles in stocks (circa Y2K) or gold (circa now) or oil (circa every few months) play havoc with the stability required to attract liquidity from ma and pa. Charts are useful representations of what happened factually. Except for very short term activities, they are not statistical representations of anything that purport predictive value. Each drop happened for a REASON. Each recovery happened for a REASON. Shit didn’t just happen randomly or because of some mystical divine power.

    To create stability, you need to throw out the hooligans who have learned how to use huge sums of capital and fast computers to manipulate markets. However, dosing that recklessly would remove liquidity and crash the markets, scaring away the people you want to bring back in. Perhaps the current commodity collapse is an attempt to remove the worst element by scaring away the cattle who pay them.

  2. mark says:

    Your earlier post and this one seem to have a subtext that although bearish psychology is not yet to the point where one can predict a new secular bull market, it is unlikely that the market will fall beneath the ’09 lows. Do I have that right? If so, why should one think so? The closest analogy (both economically and temporally) to the the situation we are in is Japan and that would suggest otherwise. The next recession (unless Lakshman is right and we are on the cusp of it if not already in it) will certainly provide a test of this hypothesis.


    BR: Dead on. The middle of 3 cyclical bears in the midst of the longer secular bear is usually the worst

  3. discusCS says:

    Interesting that the down cycles penetrated the previous peaks (’06, ’29, ’68) by a fair margin each time on a monthly (closing?) basis. So we would appear to have some work to do as suggested in the last chart.

  4. Paolo says:

    Your cycle work is really interesting – and I wish I had come across it earlier. I have been using a structural equation modeling approach to look at business cycles and have arrived at similar results. I am not including the phase parameter for the cycles, but just to say they vary from cycle to cycle. This becomes important the longer the cycle but does not add to the discussion here. These cycles are based on a DJIA surrogate going back to 1896.



    As you can see if you follow the link, the DJIA was within reasonable error in terms of prediction up to about 6 months ago. However, gold, silver and oil seem to be performing well. The reasons for the DJIA divergence seem to be a change in trading pattern that can be seen starting at about the same time, the reasons for which I am spending some time investigating. The best I can come up for now is that the price curve went from being close to “random” in a fractal sense, as it has been for the past 100 years, to highly autocorrelated. This appears to be ending now.

  5. SOP says:

    Looking at these charts three things come to mind:

    1. “Are we there yet?” and
    2)” this too, shall pass.” and
    3) “Looking for (solace) in all the wrong places…”


    Re. “long haul, via The Chart Store.”

    The top chart gives a good view, but really, it is “only” 150 years long.

    I wonder what The Big Picture would look like using charts starting around the year 1200. Charts for prices, populations whatever.

    Right now we are focusing on the tip of a Giant Wave.

    I think, we are being near-sighted – we are grossly underestimating the likely Depth of the Trough.


    “The thinking is, when the economy comes back, everything will be fine. There’s a resistance to looking at fundamental structural problems,” …

  6. mad97123 says:

    It would seem we need one more nice drop to extend the bear market’s duration off the 2000 high, and moderate the slope of the decline line. 108 months does not appear long-enough relative to past cycles. Some argue that cycle times are expanding (bulls use this to rationalize why this rally is not tired), so that would imply an even longer time window is needed to reach the end of this secular Bear.

  7. rd says:

    The three previous examples had three or four large drops to reach the final inflation adjusted low. This process took 14 to 20 years from the previous high water mark. We are only 12 years and two drops in.

    The professionals still believe there is hope, although the stock mutual fund outflows indicate that the peasants are beginnign to lose hope. One more large drop and even the professionals should give up hope, even if it is only because they have been laid off. The pros still believe in Bernanke and they also believe that they have D.C. in their pocket. However, everybody will lose credibility in the next drop and the house-cleaning after that should allow for the economy and markets to rise anew for another 2-3 decade run.

  8. [...] Long Term Secular Cycles on S&P (The Big Picture) [...]

  9. tagyoureit says:

    Or in terms of major US Wars: WWI, WWII, Vietnam War, Middle East War(s).

    Secular Bull in 2017 (and relative peace?)

  10. Randel says:

    Anyone notice this fact in top chart: for the 1200 months of the 20th century, 263+350+289=902 months of secular BEAR, or 75% of the time. I am getting very sick. Barry, you better be right this current chemo event will save the patient come 2016-2020.

  11. machinehead says:

    @Randel: month totals in the top chart (magenta color) are the time to breakeven, including part of the subsequent bull market.

    Total bear market months, from the charts that follow, are (171 + 237 +165) = 573 months (47.8% of the time).

    Just goes to highlight that in real, price-only terms, bull and bear markets are about equal in duration.

  12. martin66 says:

    BR – could you get any more pissy in your intro to comments? If you don’t want comments, I suggest just turning them off rather than insulting your readers


    BR: No, I just don’t assholes who don’t recognize snark or sarcasm posting comments. It was previously rather effective; I am not sure why it failed here . . .

  13. Randel says:

    @machinehead: thank you for the correct calculation.
    Apologies too if folks thought my post was snark or sarcasm.
    I was trying to measure the Bear beast.

  14. VennData says:

    “…I’m not sure why it failed here…” ROFL. Worthy of a Second City punch line, Chicago is already growin on youse BR.

  15. just-sayin says:

    Someone mentioned these Bear cycles had causes.
    I think you will find that the causes of the 1973 to 1982 bear had a lot
    to do with the so-called ‘Oil Crises’ of the 70s during which OPEC was formed
    and started to ‘play’ with oil prices and production.

    Anybody remember the lineups at gas stations ?