click for larger graphic

Source: J.P. Morgan Guide to the Markets



This morning’s secular bear market discussion sent me scampering for a way to illustrate that. It gave us yet another look at my favorite long term chart. As you can see above, it shows the long term bull and bear markets (for the most part, the dates are reasonable. One quibble: I would also date the post-war bull as beginning 1946 (some have argued for 1942 as well).

The good news is we are beginning the 14th year of the Secular Bear market that began in March 2000, making us that much closer to its ultimate end.

The bad news is some of these have gone appreciably longer than that (12-18 years in the US). The average of the three prior secular bear markets (18, 12 and 16 years) is a touch over 15 (15.3333). We are less than 6 years from the end date of the prior longest 20th century secular bear, and quite possibly much less.

Caveat: Be ware people claiming 1929-49 as a secular Bear — as the chart above makes clear, there was a distinct uptrend from 1932-37.


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31 Responses to “Dow Jones Industrial Index, Price Return (Since 1900)”

  1. Derektheunder says:

    I’m inclined to think this secular bear will run longer than any of the preceeding, due to the Fed’s actions. I hope I’m wrong.

  2. endorendil says:

    From that graph I conclude that unless dramatic technological progress is made (and the US is close to or at the center of it) US markets are flat.

    Hmm, so what technological change is in the near future? Which would benefit the US disproportionately.

    Is this an oblique way of telling us to get out of the markets?

  3. nofoulsontheplayground says:

    Inflation adjusted charts tell the secular bear market stories better.

  4. mad97123 says:

    The market spent the vast majority of the time living below the line, so it seems like another extended stay below the line is in order. Bring the line down to the tops of 1937, 1966 and 1987 and you can see how overvalued the market remains from the bubble era.


    BR: Thats a random line; I would caution about drawing a broad conclusion about that . . .

  5. rd says:

    My suspicion is that this will be closer to the 20 year version because so much remediation of the system has been post-poned since 2008.

    Barry comments that there was a distinct uptrend from 1932 to 197. Yes, there was because the country had been brought to its knees by 1932 with 90% losses in the stock market, deflation, waves of bankruptcies, and 25% unemployment. There was nowhere to go but up unless the country simply collapsed into total anarchy. [BR: hah ha tell that to Japan] The US was still very much at small d depression levels in 1937 though.

    The leadership in the country and its corporations, especially the financial sector has not changed in any significant way since 2008. Obama had a chance to clean house but has chosen instead to retain the status quo. The early 2000s did their job in the tech sector separating much of the wheat from the chaff, but the same has not occurred in the financial sector in the last 5 years.

    I don’t think that the country can prosper until the rule of law has been re-established for corporations and their executives, crooks have gone to jail, and the government no longer has to guarantee the financial sector.

  6. codepoet says:

    I would like to see that 10 year asset class allocation chart that BR posted yesterday over this time frame to see if there were secular shifts/long term shifts in returns for classes. From the chart yesterday, it appeared as if EME & REITS over the last 10 years (2008 the exception) were apparently beating all other classes. BUT…does that hold for the current (14) years of this secular bear. Did other classes outperform during the (~18 yr) bull years?…during other secular bulls???

    …just curious…

  7. Frilton Miedman says:

    Factoring this awsome tidbit of information –

    I find it odd that so many take the 100 yr chart at face value without parsing the history of relevant variables, like treasury/lending rates, consumer debt, wages,/unemployment/participation rate, inflation, wealth disparity, global trade and politics/sociology for starters.

    We wind up with the assumption that the market just does this in 17 year or so cycles, just because.

    I suspect consumer buying power, periodic depletion & excessive debt is at the top of the list for causation, and from there it probably takes around 17 years for the mainstream political machine to catch on and change course.

    If we did parse these things, I suspect we’d be more comfortably projecting the current secular trajectory, instead of guestimating “another 2 to 8 years or so”.

  8. Pantmaker says:

    I still think we are going to see a Schiller PE of 10 before the next leg up. Historically we tend to scratch the area between 5 and 10 before a meaningful bull emerges. This is the blood in the streets folks talk about.

  9. Concerned Neighbour says:

    To know what the stock market will do, I’d argue the only relevant variable in today’s environment is what central banks will do. And seeing as I think it’s unlikely a Bernanke/Yellen/dove/dove/dove ad infinitum will ever stop recklessly pumping, I consider it a distinct possibility the markets will never go down again.

  10. Freestate says:

    Agree with the comment that this chart has to be done with real price levels. The impact of each secular bear is much clearer – there are actual price losses in each secular bear period. And then 1929 to 1949 period is more clearly a single secular bear period. Sure there was a big price gain in there but it doesn’t come close exceeding the 1929 beginning peak. With real price levels you can see that each period has a clear set of declining tops. What is fascinating is that it once again shows what Mandelbrot pointed out – all prices follow fractal patterns. the fractal patterns are the same across all time scales – from decades to minutes.

  11. bear_in_mind says:

    Well, my thoughts toward this secular bear market are that it signals both traditional cyclical trends and a longer-term demographic and socioeconomic shift.

    In other words, I think this secular bear reflects not only the near-collapse of the financial and housing sectors in 2007-’08, but the bubblicious actions of the Federal Reserve under 18 years (’87-’06) of Alan Greenspan’s ministrations. Thus, I think we can all agree that the left bookend to this bear was the conclusion of the secular bull market from 1981-2000.

    That bull run was undoubtedly fueled by the advent of 401k accounts (c. 1978) and IRA accounts (c. 1986), two tax-advantaged options which served to spur the infusion of trillions USD into equities from Baby Boomers who were moving through their peak earning years.

    How much of those dollars have been permanently wrested from Boomers is anyone’s guess, but current market research certainly suggests that a majority of “retail” investors have failed to return to the equities punch bowl due to:

    too much debt
    too little income
    too near retirement
    too little intestinal fortitude

    …or some combination of all four.

    If all those suppositions hold water, and median incomes continue to founder, I suppose institutions, the 1 percent, and HFT could work to continue levitating the S&P500, but color me skeptical.

    Then again, the infusion of money from foreign investors may be enough to offset the diminished input from Baby Boomers…?

    At some juncture in the future, Americans will succeed in reducing their debt-load and experience some meaningful growth in median income. That’s when we’ll begin to see input from a new generation of U.S. investors and the emergence of a new secular bull market. However, the timeline for that is anyone’s guess.

  12. SecondLook says:

    If you want to get really depressed, in real prices, i.e adjusted for inflation, it can take a number of decades before a market surpasses an old high.

    The most famous example, if you look at Western markets, is the British experience. The London Stock Exchange peaked in 1900, it didn’t go past that high until 1959.

    No British investor could have foreseen, that there would be two great wars that nearly bankrupted the country, the Great Depression, the rather sudden dismantling of the Empire – not quite black swan events, but enough gray ones to repeatedly trash the investment value of English companies, not to mention investor sentiment.

    That isn’t to say that some investors didn’t do very well. One of the great examples is Keynes, managing the Cambridge University portfolio, averaged a 13% annualized gain over 13 years during the late 30′s to the 40′s, a time when the London Exchange averaged 0%.
    However, not many people happen to be extraordinary gifted as he was.

  13. catman says:

    I’m aware of the aging cyclical bull cycle we have going within the secular bear trend you posit, but I don’t see the all in mentality yet.

  14. unormal says:

    The chart should be in real terms, and include total returns, not just price action.


    BR: That would be a different chart depicting different things. There is no Universal, platonic ideal of what a long term chart looks like. This one is exponential, but it could have been geometric. You could adjust it for inflation, or for interest rates, price it in gold, show total return (inc div).

    But thats not what this chart is

  15. Conan says:

    To me the secular bear has not pulled back enough to have hit a sceular low.. For example:

    Ed Easterling’s work on PE…..we are not even close to Secular low. Actually on the high side.

    Doug Short’s work on Regression to the Trend. Still way to high and not close to a secular low.

    and since you like long charts here is even a longer one and even more interesting the cahrt in real terms after inflation. Martin Pring discussing our second lost decade.

    Look at our latest example of debt explosion & multiple lost decades, Japan. They sure haven’t pulled out of their Secular Bear Market yet… and I’m not so sure our government or Fed is really doing that much better that they did. Time will tell.

  16. drewburn says:

    I was surprised by this chart. Surprised that the 1920′s leading up to the blowoff was basically flat. Not what I expected. It’s like there was a period of stagnation followed by an attempt by banks to restimulate/inflate. That does not at all seem comparable, other than that back then there was little/no regulation and more recently deregulation. Still, I somehow expected a bullish market for the “roaring ’20s. Not sure I’ve noticed this in other charts. I would think this would be worth an explore from a grad student or two. I mean it basically look like the late 20s was simply a speculative blip. There is no “lead up” to the blow off. Seems strange. Or maybe we need an even longer chart?

  17. drewburn says:

    Per endorendil’

    I’d suggest that technological change happens well in advance of the major productivity gains they promote. So, I’m still thinking that the gains from the computer age are yet to happen or are in their infancy. Similarly, in transportation, cars were around well before they were productive. Until trucking bloosemed, most after WWII, the primary productivity benefits were not realized. Frankly, the bulk of American small business is still a long, long way from applying the techonology they have. And full productivity is far from being realized.

  18. courageandmoney says:

    I still think we need that last pullback. Something of a .382 retracement of the 2009 lows. Brings the SP500 to the 1150-1200 area If you use present highs of about SP500 1470. Maybe we get it, maybe we don’t. That would really shake the tree’s. That would set the stage for the next bull, but that would be to easy.

  19. seneca says:

    In the first half of the 20th century, investors bought stocks for their relatively high dividends, higher than the coupon on bonds. It was a different mindset than today, where the focus is on goosing the share price.

  20. [...] Dow Jones Industrial Index, Price Return Since 1900 | The Big Picture. Share this:Email Posted in Market health. Cancel Reply [...]

  21. socaljoe says:

    Based on a sample size of three previous secular bear markets, I would not conclude that, after 14 years, we are closer to the end of this one. The Nikkei is about 25% of the level from 24 years ago.

    What if the market rallies 100% over the next 10 years, but inflation over that period is 200%… is that a bull market or a bear market?

  22. BrianMcM says:

    Barry, I think we can consider the 1929-1941 situation an anomaly. The drop of 90% in the averages was due to the lack of fiscal safety nets and absence of effective monetary policy. Then, once the bottom was reached, the market was so oversold, it bounced massively. But by the end of 1932, the market had returned to the Bear and continued that decade throughout. As you know, the 1929-1932 period is analagous to the 2000-2003 period in the most recent secular blowoff. And the monetary and fiscal response to that bear cycle was met with another spike and selloff in 2007-2009. If anything, we are in the third phase of the bear that was never witnessed in the 1929-41 bear because WW2 got in the way. WW2 resolved the global economic crisis by laying waste to every continent except the Americas and Antartica. That took care of excessive supply and tightened up the labor pool. At least that would be a cynical / mechanical view. Maybe that is always the way global excesses are resolved. Thomas Malthus would have predicted that.

  23. flakester says:

    @nofoulsontheplayground and @unormal

    A stock chart without inflation adjustments and dividends etc. is potentially quite misleading.
    Comparing apples and oranges doesn’t cut it.


    BR: The purpose of this chart is to show longer term secular bear markets — and it serves that purpose. Total returns (div reinv) or inflation adjusting a chart shows other things — those picture may not illustrate what I am trying to show.

  24. flakester says:

    BR, it’s my belief that what you are trying to show would at least partly (and perhaps wholly) disappear if you were using a consistent ruler (as in an apples to apples comparison) with a more stable dollar used as a ruler.

    In other and hopefully clearer words, I submit that the purpose and points you want to make are likely invalid or at least misleading. Using a ruler that stretches and shrinks every year or every few years on the long term, sometimes hugely, is incapable of showing the full and accurate measurement picture.


    BR: Rather than rubbing your chin & hypothesizing, why not create a chart and demonstrate that ?

  25. flakester says:

    I’ll STFU about inflation now.

  26. socaljoe says:

    I agree… a chart that covers both inflationary and deflationary periods should be expressed in real terms to be useful. Otherwise it reflects the effect of inflation and deflation as much as it does the value of the stock market.

    Such a chart can be found here:

  27. rick111 says:

    Hi Barry, What is your definition of a secular bear market? After 1949 I only see a secular bull market in your chart with a couple of flat periods. Why do you call those flat periods secular bear markets? IMO, they are not secular bear markets because price does not fall substantially compared to the starting point, it stays mostly flat. In addition, adjusting for inflation and accounting for dividends mostly removes the flat areas. Thanks.


    BR: Secular Bear Market: A long period of time when markets are rangebound, and are unable to make new highs. The period is characterized by an increasing disinterest in investing by the public, and an ongoing earnings multiple compression, leading to low P/E multiples before a new Secular Bull begins.

    Also, see this 4 Major Secular Bear Markets, 1900-2011

  28. rick111 says:

    Thanks Barry for the answer. I was looking at this definition of a secular market:

    “Secular market. A secular market is one that moves in the same direction — up or down — for an extended period.”

    I understand your definition but based on the above the 2000-present period does not qualify as a secular bear market.

    Is this a matter of definition? Can you provide a reference outside of your blog? I appreciate your response but take nothing for granted.


    BR: I disagree with that simplistic answer

  29. [...] several times in the past that we are in a secular bear market that started in March 2000. In a recent post, he wrote that “we are beginning the 14th year of the Secular Bear market that began in [...]