click for larger graphic

 

There are lots of ways to look at the question of how long cyclical bull markets run for. Each approach has specific strengths and weaknesses.

Jim Stack of Investech Research has one of the better charts: Simple straight forward, easy to understand.

The current rally that began in March 2009 is now 3.8 years old — that is the average duration of bull markets since 1929. (The current Fed interventions are the obvious wild card).

I have noted repeatedly over the years how similar this cycle was to 1973-74.  That rally went over 6 years before a serious 1980 recession and correction. This is not my forecast (I don’t have one) but I would not be surprised if the current move is somewhat parallel to the post 73-74 rally.

Category: Cycles, Investing, Markets, Technical Analysis

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.

19 Responses to “Bull Market Durations”

  1. EMStrat says:

    Not to be hung up on the details, but did SPX exist in the 30s? I thought it began in the 40s

  2. TLH says:

    I agree, but the difference will be how the interest rates play out. If we have wage growth inflation, we will have a repeat of the inflation cycle. If not, there will probably be deflation. Present wages just do not support an ever expanding economy, especially with taxes going up.

  3. Moss says:

    I would say more like an Ace in the hole.

  4. nofoulsontheplayground says:

    The post 1970 bull cycles are longer than the 1932-1970 time period. A simple explanation could be that unshackled from the gold standard, the Fed has engineered longer periods of expansion via massive increases in money and credit. However, the tradeoff could be higher volatility and larger periodic disruptions.

    It is a little hard to draw too much from this data when we’re looking at only 3 secular bear and 2 secular bull markets. It’s not a large enough sample size if you just look at the secular cycles.

    What could be relevant is that since 1970, the mean is slightly more than 5-years, which would put us in the 1st quarter of 2014 for a bull peak if that played out.

  5. Livermore Shimervore says:

    are comparisons to prior markets valid anymore?

    Haven’t retail (ETF) and global investors (leary of China and Euro zone) who park money in our equity markets changed the landscape? And when I say retail investors I’m talking in large part about folks whose retirement savings, rarely traded, sit perpetually long in the S&P or some other index. With each paycheck they put even more in (by some automated dollar cost avg’ing mechanism). In othere words has converting from pensions to 401K created a market that stays long, for a decade or more.

  6. Mike in Nola says:

    BR: Does this mean you think we are in a bull market as opposed to a bear market rally as you had thought?

    Personally, I think things have been so manipulated by the central banks and the TBTF that past patterns hold little predictive value.

  7. Lukey says:

    I’d have to side with Livermore Shimervore here. And add HFT to the mix. Does it make market cycles worse or does it possibly hasten (and dampen) the shake out process in a way that creates even more upward bias in the market (except, of course, for those pesky “flash crashes”)?

  8. bear_in_mind says:

    @BR: Without offering a projection or guess on duration, do you have a hunch on how much higher the cyclical bull cycle will take the market before it runs out of gas?

    @LivermoreShivermore: I would concur that automatic 401/457 payroll deductions probably does create something of an automated “bid” into the SPX, Dow, Nasdaq, but I suspect it’s hard to quantify to what degree. Barry, any stats, estimates or guess(es)?

    @Mike in Nola: It appears the chart is referencing cyclical bull markets, not secular.

  9. Petey Wheatstraw says:

    Livermore Shimervore and Mike in Nola have it right: We’re not in Kansas anymore.

    We’re in the middle of the results of the Great Transformation into the Great Credit/Debt economy. Who needs production when you have easy credit? No precedent for predicting when or how this shit storm will blow over. I get the feeling that whatever follows it won’t have a precedent, either.

  10. DiggidyDan says:

    My mom asked me what mutual funds to put her 401k into last week. . . I.d give the bull six more months.

  11. hjd says:

    The last two cycles ended with collapses, despite the second being shorter in duration than the first. Use of leverage in stocks is now higher than 2007. Momentum may elevate stocks due to higher multiples and the “greed” paradigm. But, then we have the risk of another collapse. 73/74 also ended badly.

    has nothing been learned from these prior cycles?

  12. CSF says:

    I share BR’s suspicions of a longer (cyclical) bull market simply because recoveries take longer during a financial crises and develeraging cycle. There’s little chance that the economy will be slowed in the near future by a tighter Fed, rising wages, or capacity overutilization. Absent a suicidal Congress or an external shock, we’ll probably muddle along for longer than average before the next down leg. Just don’t expect fantastic returns between now and then.

  13. gkm says:

    http://2.bp.blogspot.com/-a_Dwuh8ZztQ/UME-ItN-JqI/AAAAAAAAAfA/blBOAlNR71U/s1600/2012-12-06_195048.png

    This hasn’t been updated in over a month, but the parallels are indeed fairly striking – in more ways than this alone.

  14. bear_in_mind says:

    This L.A. Times report on premature 401(k) withdrawals sure doesn’t bode well for future personal finances of Baby Boomers. This kind of premature selling absolutely destroys the power of compounding.

    The key grafs (emphasis mine):

    “The withdrawals, cash-outs and loans drain nearly a quarter of the $293 billion that workers and employers deposit into the accounts each year…”

    AND

    “…42 percent of workers cashed out their plans rather than rolling them over when they changed jobs.”

    These numbers suggest about $220 billion annually flowing into 401(k) accounts that’s NOT churning and being cashed-out. If a third of that sum flows into bonds and money market funds, the remainder would create a fairly steady $145 billion “bid” for markets from 401(k)-type accounts.

    Naturally, these numbers are dependent on employers and employees maintaining their participation rates, but overall, suggests broader-based upward “oomph” for today’s Dow and SPY than existed in previous eras.

    But, holy cow, those withdrawal figures are sobering. Only upside is that for those who manage to stay-the-course with equities over the long haul, these early withdrawals ought to somewhat soften future selling pressure on the market (net bullish).

    401(k) breaches undermining retirement security for millions
    L.A. Times
    January 15, 2013
    http://www.washingtonpost.com/business/economy/401k-breaches-undermining-retirement-security-for-millions/2013/01/14/f54a0e90-5e70-11e2-8acb-ab5cb77e95c8_story.html

  15. Mike C says:

    I posted this elsewhere just recently:

    After reading these posts, I was motivated to just take a quick look and see how the 2009-? cyclical bull market is tracking versus the 2003-2007 cyclical bull market.

    http://randomroger.blogspot.com/2013/01/a-new-year.html

    For 2013 I think there is a high probability of the economic and stock market cycles ending. From the bottom up we certainly could continue to muddle economically and stocks continue to do well but the cycles now are old. Bespoke cites the current bull market as the ninth longest out of what is counts as 26 bull markets since 1927. Of course my base case for the cycles ending in 2013 could be wrong which would be a good thing but it is always worth pointing out that all expansions and bull markets end, it is normal and will happen again.

    http://blogs.decisionpoint.com/chart_spotlight/2013/01/20130

    To summarize, the ten-year trading range of the S&P 500 Index suggests that a major price top should be arriving sometime in the first half of 2013, maybe within three months. After that the Four-Year Cycle low (price low) projection would be for the last half of 2014, unless the decline is exceptionally accelerated.

    So far, the sequence and magnitude of returns (price change, no dividends) of the 2009 cyclical bull market bear an uncanny resemblance to the 2003-2007 cyclical bull for the S&P 500.

    2003 – 29% 2009 – 26%
    2004 – 11% 2010 – 15%
    2005 – 5% 2011 – 0%
    2006 – 16% 2012 – 13%
    Oct 2007 – Market peak 2013 – Market peak?

    To be clear, this isn’t some ironclad forecast…simply an interesting comparison that might be a roadmap for the next 12 months in terms of having one eye on the exit door. I think there would be a certain symmetry to once again topping out in the 1500-1550 region and putting in a decade+ triple top.

    Assuming a bear market and perhaps bear market bottom in 2014, this would dovetail nicely with previous secular market bottoms. The 1921 secular market bottom was 15 years after the 1906 peak. The 1942 bottom was 13 years after the 1929 peak. One could argue whether 1966 or 1968 was the secular peak, but the 1982 bottom was 14-16 years after that. So a bottom in 2014 would be 14 years after the 2000 secular peak. I think there is a very good probability that the next cyclical bear market low will in fact turn out to the be the secular bear market low that serves as the launching pad for the next 300-500% up move in the stock market. This might also nicely coincide with past secular market lows where the majority of the retail public is apathetic towards stocks. I think one more 30-40% drop might be the final nail in the coffin for public sentiment towards stock ownership.

  16. Frilton Miedman says:

    TLH Says:
    January 15th, 2013 at 12:28 pm
    ” I agree, but the difference will be how the interest rates play out. If we have wage growth inflation, we will have a repeat of the inflation cycle. If not, there will probably be deflation. Present wages just do not support an ever expanding economy, especially with taxes going up. ”

    ~~~

    I agree, but add consumer debt to income ratio to the mix.

    What’s not mentioned (or maybe I missed it) is the nature of historic bear/bull cycles,, the worst bears in history are credit driven.

    The root of the 2008 crash was banks playing a gargantuan shell game with consumer debt, by lying about garbage/liar loans ratings & converting them to “triple A” assets in the greatest wealth extraction in U.S. history.

    Your home value is down 30%, that equity went to the pockets of banking exec’s with high priced lobbyists in D.C.

    We might have a partial grip (insert bad joke) on the CDO/bank balance sheet problem, but we haven’t done a thing for the root consumer debt/wage problem that was there before the CDO scandal began.

    Between globalization, it’s effect on U.S, wages, and the decreasing need for labor through automation, I keep my portfolio hedged until I see policies that focus on this, instead of the FED resorting to insane measures to stave off the obvious.

  17. FSUNoles says:

    Will be interesting if we continue for next 4 months and when “Sell in May and Go Away” arrives with technicals probably very overbought conditions…..

  18. gloeschi says:

    just ran a regression on bull market performance (dependent variable) and duration in days (independent variable) since 1950. 89% of stock market performance is simply explained by duration of the bull run. Ha!

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