A decade ago, I concluded that we were in the early stages of a secular bear market, and that investors needed to adjust their risk postures accordingly. Back in December 2003, I penned a piece for the Stock Trader’s Almanac, titled Managing the Very, Very Long Term, based on this blog post from November 2003.

Long time readers know this is a major theme to for me. Much of my commentary, presentations and investing posture has been about longer term, secular cycles. Search the Big Picture for the phrase “secular bear market” and 659 results come up (in quotes, 130).

Here’s what I wrote back in 2003:

“The panoramic view leads me to the present conclusion. Following an 18-year Bull market [1982-2000], and a three year Bear market, we are now committed to what looks like a long-term military obligation in Iraq. In the grand scheme of things, I suspect we are in for a harder long-term slog than the mere 3 year Bear market suggests.

Historically, this suggests an extended period of range bound trading as the highest probability long-term scenario in my view. I expect vicious rallies, and wicked sell-offs to occur — over shorter term cycles — within the larger timeline. Active management and capital preservation are going to be the key methods of outperformance.”

Let’s put this into more specific quantitative terms. According to data from Fidelity:

Average secular bull market lasted 21.2 years and produced a total return of 17.2% in nominal terms and 15.9% in real terms. The market’s P/E more or less doubled, from 10.1 at the start to 20.5 at the end.

Average secular bear market lasted 14.5 years and had a nominal total return of +1.0% and a real return of –2.3%. The market’s P/E compressed by an average of 9 points, from 20.5 at the start to 11.3 at the end.

Here we are, a few weeks away from the start of the 14th year of the secular Bear market that began March 2000. The question on more than a few peoples’ minds has been whether or not it is reaching its end.

To answer that question, we need to understand exactly what a secular bear market is. Over the years, I have developed a my own definition of Secular Bear Markets:

“A of Secular Bear Markets is a long term cycle which typically begins after a long term bull market peak and crash. It is primarily characterized by strong, even excessive rallies and selloffs, all occurring within a broad trading range. Despite the strong rallies, markets often appear to be unchanged a decade or so into secular bears.

The psychology is one of compressing Price to Earnings multiples, as investors become increasingly unwilling to pay the same price for each dollar of earnings. There is often a general malaise to the broader society, sometimes encompassing political scandals and/or war.

On Main Street, there is a general disinterest in equities. Ratings for financial television and other media fall. Interest in non stock investments — especially Bonds, Commodities and Real Estate — rise.”

To conclude that the Secular Bear is ongoing, we need to see a few factors:

-Are markets still rangebound? Have we made new highs in various indices?
-Are P/E multiples still contracting?
-Are financial news media ratings still falling?
-Is society generally pessimistic?
-Is Main Street still disinterested in equities?

Some of the answers to these questions are purely quantitative, and do not require any human judgment. A few of these do require a squishier answer. After 36 months or so of capital outflows from equity funds, we should not rush to judgement after the first month of inflows.

And there is a major caveat to this: The Fed’s extraordinary ZIRP/QE intervention creates an impression of inorganic gains. Without the unprecedented FOMC actions, I am unsure markets would be anywhere near current levels.

Regardless of your answer to our broad question, there is one thing that I believe to be clear: We are much closer to the end of this secular cycle than to the beginning. Many optimists — most notably, famed technician Ralph Acampora — believe the secular bear market has ended. Even skeptics have to agree that we are more likely in the 7th or 8th inning than earlier stages of the game.  Only the “America is Japan” crowd thinks we are in the 3rd or 4th inning.

The key question for investors: Are you prepared to make changes to your portfolios?


Secular Cycles

Source: Haver, Factset, Robert Shiller, FMRCo. Monthly Data, since 1871.



Looking at the Very Very Long Term  (November 6th, 2003)

See also:
Is the secular bear market ending for stocks?
Jurrien Timmer (Fidelity Global Strategies Fund)
Fidelity Viewpoints, 01/27/2013  

Category: Cycles, Federal Reserve, Investing, 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.

75 Responses to “Is the Secular Bear Market Coming to an End?”

  1. ByteMe says:

    The problem is: will PEs compress some more if/when the FOMC gets out of the market? In the past, we looked for PEs in the single digits to indicate the end of the bear run… but with a distorter of massive proportions in the market, what is the right PE?

  2. constantnormal says:

    I don’t know whether “we are Japan” or not, but I do think that it is a possibility that must be kept in mind.

    I have this (unsubstantiated by data) “feeling” that a secular bear market tends to have a washout at some point that shakes all the fruit from the trees, not just the fruit that was ready to fall to begin with. And we have not had that (yet).

    Also, regarding the duration of secular bears, I think that the shock that the economy (not just the US economy, but the global economy (where “global” = “developed nations”)) has had exceeds that of the one delivered in the 1930s, as it hit closer to the base of the economy (property), and with greater force. Also, we have yet to see any fundamental reforms or corrective actions, and I think (again, unsubstantiated by hard data) that past secular bears saw such reforms enacted before they ended. The one in the 30s had huge reforms in the financial industry, coupled by a wartime stimulus that was unprecedented. The one from the 70s through the 80s saw the inflationary momentum introduced by the OPEC price hikes being deflated by Paul Volcker, along with the dismantling of our corrupt and antiquated S&L industry.

    This time around, we have unbridled leveraged greed in the financial markets, and corruption in the political arena that exceeds that of the days of Tammany Hall and Boss Twead. Nothing whatsoever has occurred to change any of that, and we have immense, beyond astronomical, amounts of global CDS leverage in play, just waiting for the right trigger to bring it all down. When we see the next credit collapse, the Fed will be powerless to halt it, and we will begin building a new house of cards. That’s when the next secular bull will begin, from ashes and cinders, not via a gradual slow emergence from this mess we are in.

  3. secular bear says:

    So, cutting to the chase, for a tactical long term investor, which holds 60/40 as baseline, and is currently 60/20/20 equity/bond/cash, would you say this is a good time to switch to 80/20 equity/cash?


    BR: Why would you jump from 60/40 to 80/20? There are other steps along the way as well (i.e., 70/30).

  4. Roanman says:

    I think it’s yield that will tell the story going forward. 2012 yields likely having been juiced some to possibly a lot by tax considerations. It’ll be interesting to see if stocks return enough cash going forward to inspire.

  5. JimRino says:

    Warning: Krugman WRONG by 5 Years.
    Paul Krugman has projected that Solar Power will be cheaper then All other energy sources in 7 years.

    In this application Solar has already Beat Down the Coal Energy/Pollution source:


    Again, it’s time to ask: Where is Exxon?
    Exxon having a hard time finding new sources of oil, yet, new sources of ENERGY are now available, and Exxon is NOWHERE to be Found.

    Time to Put an Innovator in the CEO seat.

  6. ConscienceofaConservative says:

    Question is how many secular bull markets begin from a period of high valuations


    BR: Define high valuations. By most metrics, markets are reasonably priced.

  7. Rightline says:

    Mish has proclaimed a top in the market based on the Barrons cover. He is quick to say I told you so since he got a call right back in 2005 with the Time housing cover. Not nearly the same indicator in my view. He ignores all his bad calls with confirmation biases abound. I must have missed his last 4 mea culpa year end reviews. He has been desperate and wrong for so long it is tough to filter all his venom.

    I am harvesting some gains selectively. However, the biases are too quick to change in my view. BR usually says let winners run. The recency effect is a killer on many investors and whipsaws them into horrible underperformance.

  8. gloeschi says:

    “Many optimists — most notably, famed technician Ralph Acampora — believe the secular bear market has ended”

    That’s a self-serving argument (which optimist would NOT believe the bear is dead?)

    Valuation: Crestmont P/E, Cyclically adjusted P/E, Q ratio, S&P versus own trend line all say market is overvalued by 30-50%.


    BR: I was going the other way (They are bullish, therefore they are optimists) but I see your grammatical point.

    How about
    “Many optimists observers are optimistic — most notably, famed technician Ralph Acampora — believe the secular bear market has ended”

  9. mjb1286 says:

    Barry, good thought provoking article but as you mentioned how one does adjust for the Fed’s actions in order to determine whether the bear mkt. is over? If one answers positively to the above 5 questions and thus with accompanying analysis determines the bear market to be over where do markets go? What I mean are equity price increases (not to mention the economic growth) self-sustaining without more Fed help? I am assuming that an end of a bear market would mean that no more Fed assistance is required.

    As you mentioned in your article you don’t believe the markets would be anywhere near these levels without Fed help. A self-sustaining bull market would be able to compensate based upon other factors for Federal Reserve policy “normalization” and I don’t understand if that is yet possible.

  10. grandwazoo says:

    Yes everything comes to an end and we are closer to the end than the beginning I agree. However, I feel there should be one last final shake out before the next long term bull market. That would be under normal conditions, but things are anything but normal with all the Fed intervention. So it’s anyone’s guess but I still won’t be comfortable until I see one more shake out but it should be smaller than the 2008 drop.

  11. Conan says:

    Very good analysis & definitions Barry, thanks. Here are some of the things I think about as far the market being Bull or Bear Secular:

    1) A Bear market is declining or range bound as measured in months or years.

    2) A Bull market is ascending and the dips or corrections last weeks or months, not years.

    So some questions as the Fed support and the Japanese experience has clouded a comparison of today vs historical data somewhat.

    1) We have not made a clear breakout so we are well within the tolerances of range bound. Even if we have a new high it doesn’t necessarily mean we have broken the range. the last new high ended badly.

    2) All matrix as posted by Ed Easterling and Doug Short give me reservation that we have hit a low that would signal a bottom to a more historical Secular Bear Market.. Another leg down wouldn’t surprise me. But it is true we are closer to the end of this secular market, so who knows.

    3) I would say we are a few years away for a definite call. Most of this is hind sight. Just like you made the call in 2003 of the Secular Bear, 3 years after the hindsight number, we most likely will have to do the same for a Secular Bull.

    Bottom line for me it still pays to be a trader. Until the Secular Bull Market is proven, buy and hold is not for me yet.

  12. ConscienceofaConservative says:

    BR: Define high valuations. By most metrics, markets are reasonably priced.
    –Shiller P.E. Dividend yields are no where near historical highs either..


    BR: So those are the 2 metrics you are going to pick out of the list ?

  13. danm says:

    I also think we are closer to the end than the beginning however, I am looking for a few more elements before calling it over.

    If you look deeper into those bear markets represented on your charts, you will notice that in each one there is 1 similar feature: the most productive economic group (40-50 year-olds) dropped relative to the number of dependants. This was usually due to war. In our current case, we have Gen-X and Gen-Y which is a MUCH smaller group than the Boomers. In fact, the ratio of workers/dependants just peaked and will be dclining for a while… until the younger ones come in. On top of this, Gen-X and Gen-Y are loaded with debt. Once the debt is paid down, will they relever at age 50?

    Another important facotr is household income. Since Boomers represent a large segment of the population, we will keep on seeing a ceiling on household income if not an outright contraction for a few years still.

    Boomers have not saved enough for retirement and will stay in the workforce. It will probably be hard to improve productivity as the workforce gets older and becomes more set in its ways trying to maintain the status quo.

    We are not in a productive environment. We are still in the creation of wealth through financial manipulation.

    Sure there are some cretive areas here and there, but not enough to take us out of this funk yet.

  14. [...] has backed up, there is a lot of talk about whether this is the big rotation out of bonds and into stocks. Within the bond market, there is a rotation out of Treasuries and into high yield. Overall, the [...]

  15. danm says:

    That was at the marco level. Now at the micro level, let’s look at the cost side of the income statements:

    - compensation = all-time low
    - dd&a = low due to lack of investment
    - interest expense = all-time low rates
    - taxes = low
    - COGS = low due to low rates and low inflation
    - marketing and advertising… probably all-time high.

    Many of these variable are at extremes… IMO, we must see a huge rollover in these which would cause a shock before seeing a new bull. And higher credit spreads would not help these costs.

  16. [...] Into Stocks – CNBC A Reluctant Bear’s Guide to the Universe – Hussman Funds Is the Secular Bear Market Coming to an End? – The Big Picture Screwtape Looks at Silver Vault Inventories – Screwtape Files China [...]

  17. “…And there is a major caveat to this: The Fed’s extraordinary ZIRP/QE intervention creates an impression of inorganic gains. Without the unprecedented FOMC actions, I am unsure markets would be anywhere near current levels…”

    Good on You, BR.

    That, to me, is the Item that receives, far, too, little ‘Popular’ discussion..

    ByteMe, and constantnormal, above, point to ~some of the effects..

    We are, are We not?, in the middle of a “(Re-) Construction of Knowledge”-Event (Series thereof..)

    one Facet of background..

    the Construction of Knowledge

    LSS.. it is incumbent upon us to ‘leave behind old Tools (of understanding)..’ (if We are to ‘engage’ in these, current ‘Markets’..)

    from previous Threads..

    “…that’s very interesting, I had a # of conversations, over the weekend, where it was concluded that it would be wise to more heavily weight the Poli-Sci-side v. the Fi-side–moreso, now, than before, in this Poli-Sci-Fi pachinko parlor that masquerades as our ‘Economy’…”
    “…on the flip-side, think about the CRE carnage that would have been, but for the ‘Bailout’..

    the ‘hattie would have looked, literally, like a Neutron-Bomb had gone off..

    when are people going to realize that QE=”through the looking-glass” ?

    “Extend and Pretend” says it all, too much, and, not, nearly enough..”

    We can stay “Through the Looking Glass”, “Extend and Pretend”, and allow the ‘Poli-Sci’-side to Reign, or We can get serious about Finance (again..), and our Political Economy..

    the first Path leads toward “…Welcome to the Network of Global Corporate Control…” & “…”Financialization of Food and Profitability of Poverty” …”

    (snips from ‘Twitter Feed’, found http://andrewgavinmarshall.com/2011/10/21/education-or-domination-the-rockefeller-carnegie-and-ford-foundations-developing-knowledge-for-the-developing-world/ )

    if that’s where We want to go..We need nothing, but more of the Same.

  18. cmcristi says:

    I liked this article very much. Also the question to each investor.
    Don’t you think the picture with bull and bear markets would deserve some further indicators as well? Like for instance global events that turned the face of the world:
    - 1920 is pretty close to end of WW1,
    - 1945 is pretty close to end of WW2
    - 1986 is pretty close to beginning of the computer run world and thus improvements in productivity leading to expansion margins for PE

    What do we see now as quantum leap?

    The “almost free” energy source is not here yet. The atomic power was deemed as too risky. The coal energy in China is poisoning the air on the planet. The fusion is too far. The alternate power sources are barely making a single digit production of the total world production.

    Here are my thoughts. I can think of margin for PE expansion as being the population growth and increasing the purchasing power of the third world and emerging markets. Of course this will increase the cost of food and of commodities in general because of the infrastructure needs in those areas. So it should be like a half of the current world should go through the reconstruction process of the Western World after WW2.

    If that part of the world does not ramp up, what other sources of stimulus can we think of?

  19. Mike in Nola says:

    Of course, the same might have been written about the Japanese market several times since their crash started over 20 years ago. Yes, this is the “we are Japan” argument, but the central bank tactics have been much the same; Japan just has a big head start on us.

  20. dctodd27 says:

    I think you are right we are in the later innings of the game, but I don’t think the all clear signal is here or even close. A previous commenter mentioned numerous valuation measures to justify this, ie Shiller PE etc, but even the dividend yield on the S&P 500 (2%ish) indicates this is not the start of any sustained move higher. Previous secular bear markets ended when div yields were 6%+. Some will highlight the extremely low payout ratios we’re seeing today but I think it’s a function of artificially high profit margins. Again, this isn’t a “crash” alert because the market might just go sideways for an extended period as earnings continue to grow and valuation measures improve. You just have to be careful where you take risks thes days.

  21. danm says:

    started over 20 years ago. Yes, this is the “we are Japan” argument, but the central bank tactics have been much the same; Japan just has a big head start on us.
    I think Japan is a great example of how sclerotic a country becomes when the retiree population controls the wealth. However, the comparison stops there.

    IMO, the US outcome will not look like Japan. Japan of the 90s was a country of 120M net exporting to hundreds of millions of boomers reaching their peak earnings years. They did not need to change.

    The US is a net importing country of 300M with the reserve currency… it is competing against many countries in the same demographic situation. They all need the emerging markets to buy their exports but at the same time should be very afraid of letting them consume the energy they should be strategically keeping for themselves.

    I think Japan has had it easy, in my mind they are about to enter the crisis mode. Time will tell.

  22. Manofsteel11 says:

    Artificial interest rate levels, QE, falling avg revenue and earnings, European entanglement, Japan’s need for restructuring, China’s hidden numbers, student loans, demographic imbalance, currency-related tensions, huge deficits across the board, pension funds struggling to meet obligations, huge underemployment poverty and widening soci-economic gaps, unattended derivatives, crumbling infrastructure, too big to function/manage banks, climate volatility and its effects of food&water security, and the good news is Apple, 3-D printers, free online university courses and fracking?

  23. Mike in Nola says:

    Just to expand a bit: the Japanese did not take down their zombie banks and investment companies. They are still sucking up capital. Huge losses were just ignored and papered over. The need to keep the zombies alive (if that is an appropriate word) has been a constant drain pulling resources from what should have been the productive part of their economy.

    Our Fed and Federal Government tactics aren’t much different than what the Japanese have done. You have banks with large numbers of REO’s being held off the market with the Fed funding them and commercial real estate loans on shopping centers and strip malls being rolled over with the regulators blessings despite the collateral value declining as online shopping eats away at the tenants, again with cheap money making up the deficit.

  24. rd says:

    I think we are still one toilet flushing away from the end of the secular bear.

    1. The 2000 valuation peak was off the charts. Normal statistics on total stock market returns during a secular bear are probably quite over-optimistic for this one.

    2. Valuations – valuation methods that do not change dramatically quarter to quarter are still very high (upper 20%, even after the distorting effect on averages of the past 14 years) including dividend yields, CAPE, Tobin’s Q. This is a market where you have to get your returns from capital gains, not dividends.

    3. Stock market valuations are this high and dividend yields are this low because of incredibly low short and long interest rates due to ZIRP and QEinfinity. This stock market would be half its current value for the current earnings and dividends if interest rates were close to average.

    4. The interest rates are this low because economic activity is poor. Money velocity is low, consumer demand is artificially pumped by debt well above historic norms, and governments are running large deficits. There are still several years of deleveraging that need to occur – that will not pump demand. The demographics are also starting to conspire against increasing demand.

    5. The professional traders in large institutions can trade without fear of bankrupting their organizations because governments have guaranteed that their organizations will not be bankrupted. Would we really see the London Whale in a system where Dimon didn’t feel like he had the full faith and capital of the US government behind him?

    6. The financial sector has learned that they won’t be punished for their bad activities. They don’t have to worry about jail time, or even being prosecuted unless they engage in “insider trading” or turn themselves in for running a Ponzi scheme. So there are almost certainly people currently continuing their anti-social trading and fraud activities as we speak on top of the high leverage that is now officially sanctioned. These activities will be gradually gnawing away at the apparent “stability” in the system like termites.

    7. However, the population (and even Congress) are not going be pleased with the prosepct of having to bail out major financial institutions again. So theere will likely ba a disconnect in the next crisis where everybody will assume that the banks will be made whole but there is a good chance that many won’t be. That alone would probably discount the market 25% or more as the margin calls take over.

    However, the next toilet flushing will likely break the mindset that is leading to teflon banks, irresponsible leverage etc. and will pave the way for the new secular bull that will probably last for 20+ years.

  25. SCTTD says:

    It is my observation from what is a limited data set, that both secular bull and secular bear markets have 3 full business cycles. This bear has only had 2 so far. So I would agree we are very close to the end but suspect ultimate measurement will extend a bit further out.

    Anecdotally, and only one jobs market data point that so far appears to be an outlier, the 2nd derivative of rate of growth in temp services employment numbers seems to be suggesting recession in 5 – 7 months.

  26. Moss says:

    Must break the grip of fraud and the oil strangle for new bull.

  27. [...] may or may not be entering a new secular bull market for stocks. Only time will tell. However those clinging to cash for the past five years will likely kick their [...]

  28. ancientone says:

    I have a really bad feeling about our economic future. For my children’s and grandchildren’s sake I hope I’m wrong, but the FED’s actions have not helped mainstreet, they have just pumped up stock and bond prices (they have to do something with all that money) while income keeps falling for the bottom three income quintiles. With a large percentage of our GDP coming from retail sales, it will not be able to grow if the public doesn’t have the money to spend; I don’t think the top two quintiles can grow the economy with their spending alone. And I don’t see any mechanism on the horizon that will enable working class people to regain any leverage over their wages. The present corporate drive for maximum profits at any social cost looks like the actions of the crew of the ship in “Around the World in 80 Days” tearing it apart piece by piece and burning it to keep the fire for the boiler going. Good luck with that.


    BR: Well, if you are getting a bad feeling, than who are we to argue with that ?

  29. b_thunder says:

    We’re talking stock market bull/bear cycle, not the economic cycles, correct?

    If so, I have to ask: Has the “work of a Bear” been completed? Have all the excesses and misallocations of capital from the prior Bull cycle been rectified? Have all the Ponzi and Speculative investors (per Hyman Minsky) been slaughtered? My answer is NO. There’s a lot more “work” to be done by a Bear, and that can’t be “papered over” by throwing cash out of helicopters.

    Are we in the 4th or the 8th inning? It depends. It’s possible that the economy will improve, the market will force the rates up ( at least partially neutralizing the ZIRP) and, even the stocks will not move much fr another 5 years. It’s also possible that there the largest financial twin-bubbles in history (gov. debt and derivatives) will implode tomorrow, or next month, or 3 years from now, and that will conclude the Bear cycle.

    Japan: no, USA is not Japan. We should be so lucky… Japan is a homogenous nation with low crime, incredible infrastructure, 2nd to none healthcare system and, until recently, a population with highest work ethics and staggering net exports. Until the tsunami Japan was #1 or #2 creditor nation for the past 30 years. USA has become the largest debtor nation. No, we’re not Japan. While Nikkei remained in a “range” for 20 years, I don’t think it’s in the cards for the US markets.

  30. Cooter says:

    Why in God’s name does anyone want to discount the Fed’s contribution to the markets? Central bank activity is a fundamental tenet of our banking system and capital markets, so why are people so quick to hyper focus on it and count it as a negative?

    I just don’t understand this puritanical hate for the QE. I still haven’t seen how it is a negative. I do agree it is hurting savers, of which I am one, but given the political clusterf*ck across our governments it is imperative that we have central banks acting as they are today.

    Aren’t investors supposed to be pragmatic and unemotional on these topics? I sure read a lot of pure hate and anger about QE and don’t see a lot of acceptance and moving forward.

    The Fed, ECB, BoJ, and BoE (now with new powers and new chief) are here to stay. To me, the cooridinated actions taken by these institutions over the past 4 years are signs that the global economy is here to stay.

  31. Cooter says:

    I also don’t believe we have “artificial” interest rates. Wasn’t the main argument against the last two rounds of QE was that interest rates were already low, and that lowering rates through more QE would not help any?

    This whole inorganic / artificial thing doesn’t add up to me as we have been living in a perpetual state of central bank action for a long time. If the FED can’t create economic growth through QE, then all economic growth since QE must be “organic” and occurring with or without the Fed. I mean, come on guys, the entire continent of the USA is built upon stolen land, so the development of the USA and Canada is pretty artificial because we have yet to fully compensate the Natives for stealing their land and culture.

    Finally, what is the catalyst that would ignite another crash? Is there really another Lehman Brothers waiting to go BOOM right now, and what is the event that triggers that collapse?

  32. lucas says:

    I do not think Conscience is intending to choose only two metrics. I think he is saying there are at least two metrics that might undermine some of the positive metrics. Valuations of individual stocks generally seem high to me, for instance, PEG, Graham number, Piotrosky and some others. It is like little investors are buying at a high, hoping it will go higher, kinda like during the housing bubble.

  33. FuzzyWuzzy says:

    Agree that the US equity market has been in a secular bear since January, 2000 punctuated by 2 cyclical bull markets. For the secular bear to end, investors must finally capitulate, which traditionally requires a massive swoon to clear all weak hands, speculators and market manipulators. In the wake of such devastation, strong hands will incrementally make prudent investing attractive to Main Street again.

  34. wally says:

    I don’t see a strong indication one way or another in the tea leaves. I’d like to believe we are entering a secular ‘bull’ era, but I don’t see any driver for one. The last two were generational events: the post WWII ‘greatest generation’ years and the boomer’s coming of age years. What do we have now? We will increase employment somewhat as housing ramps up; we will gain a bit of population and some skills as we reform immigration policies… but most technical innovation right now is in diminishing things, not increasing them: more fuel efficiency, greater efficiency as we apply computation and automation. I don’t see that any innovation in biotech or nanotech drives a large economic boom and I think the computer and internet boom has largely ended: almost all development and sales there are now simply entertainment, not productivity or business related.
    The world is awash in liquidity and wealth (the flip side of debt) largely because nobody with cash has any idea what to do with it other than protect it (government securities, dividend payers) or speculate with it (our last two bubbles – tech and housing).

  35. mad97123 says:

    “Question is how many secular bull markets begin from a period of high valuations

    BR: Define high valuations. By most metrics, markets are reasonably priced.”

    They are reasonably priced if you assume the government support that generated the earns is sustainable.

    In 2007 the corporate earnings from the housing bubble and home-owner ATM equity withdrawals were happily projected forward to rationalize why stocks were reasonably valued then.

    Those earning were real, people really did take money out of their homes and spent it. Earning this time are real, the government did borrowed and print the money and spent it. Only question is how long that can continue.

    There were plenty of housing bears in 2005 and 2006 who were pointing out that those earning wouldn’t last and they were right. Now the same question applies to the buyer of last resort.

  36. mad97123 says:

    It does strike me as odd to hear analyst apply ‘average’ or ‘normal’ PEs to justify current valuations. The Fed, the market’s savior certain doesn’t see this as a normal market. You don’t have zero interest rates and unending QE pegged to a distant goal in average or normal times.

    Fact is we have NO historical data for our current situation.

  37. mad97123 says:

    Will rising rates (great rotation theme) be supportive of a bull market the way falling rates were from the 1980s high? Doesn’t sound ideal for governments and underfunded pension funds unless they are the first to find a chair in the great rotation.

    And of course if Ma & Pa really are going to get burned for their run into bonds they will be retrenching all the more, saving, working longer, keeping jobs from the youth, etc.

    Is a rising rate environment ‘average’ or ‘normal’ when it comes to valuation metrics for the past 30 years?

  38. ToNYC says:

    “Fact is we have NO historical data for our current situation.”

    You don’t need to know McLuhan to know that until the current situation becomes history, there can not be ANY historical data. Or as my dear Professor was saying, we see the present (current situation) through a rear-view mirror, walking backward into the future. Evolution kills relentlessly, like Capitalism when it exists without Plutocracy.

  39. MikeNY says:

    The fact is, the Fed believes it CAN generate economic growth via QE; they even quantify the incremental GDP that they expect QE to supply.

    My problem with QE is that I believe much of the “kick” of QE comes via the wealth effect. Greenspan as much as admitted that the Fed targets equity prices; Bernanke is doing the same, on steroids.

    So we have manipulated markets. What happens when the Fed pulls back — and what happens if (when?) they lose control?

    Once again, back to Chuck Prince and his music.

  40. techy says:

    Nobody knew that the GOVT/FED was going to backstop financials/autos in 2009 and save the world preventing a massive deflation. Same thing here we can sit here and speculate but we cannot say for sure what will be the direction of Govt/FED policies, Republicans game plan(stall economy and blame democrat like 2010-2012 or maybe this time they co-operate more?). Same thing applies to Europe, will they backstop all those broke countries and maybe start investment to improve employment picture?

  41. evernewecon says:

    All The Following Is About A Duplicitous Mortgage Bubble, This:


    The “Fiat Dow” Is Simply A Throw-In With The Fiat Mortgage Market And Real Estate Market, Except The Latter Involves The Sequestering Of Inventory, Whereas There’s No Such Thing As Sequestering The Dow.


    * SNIP *

  42. mad97123 says:

    Ralph Acampora leading the charge into the 2000 bubble… just saying the guy may not know much about valuations.

    “We picked 17 of the stupidest statements made by Wall Street’s leading minds to illustrate their tendency 93% of the time to mislead and manipulate investors using hype, happy talk and pure biased B.S.

    Warning to investors: It will happen again, in 2013. Why? This time is never different: It repeats every market cycle, never stops:

    March 1999: Harry S. Dent, author of “The Roaring 2000s.” “There has been a paradigm shift.” The New Economy arrived, this time really is different.

    October 1999: James Glassman, author, “Dow 36,000.” “What is dangerous is for Americans not to be in the market. We’re going to reach a point where stocks are correctly priced … it’s not a bubble … The stock market is undervalued.”

    August 1999: Charles Kadlec, author, “Dow 100,000.” “The DJIA will reach 100,000 in 2020 after “two decades of above-average economic growth with price stability.”

    December 1999: Joseph Battipaglia, market analyst. “Some fear a burst Internet bubble, but our analysis shows that Internet companies … carry expected long-term growth rates twice other rapidly growing segments within tech.”

    December 1999: Larry Wachtel, Prudential. “Most of these stocks are reasonably priced. There’s no reason for them to correct violently in the year 2000.” Nasdaq lost over 50%.

    December 1999: Ralph Acampora, Prudential Securities. “I’m not saying this is a straight line up. … I’m saying any kind of declines, buy them!””



    BR: I consider Paul a friend and like him alot — but I think we need to distinguish declaring the end of the secular bear from overstaying your welcome at the end of a secular bull . . .

  43. mad97123 says:

    Acampora in December of 2007. The bull market was going to regain strength in the second half of 2008? And we should be listening now after these two bubble calls?

    With the Federal Reserve cutting interest rates, Acampora thinks a traditional yearend rally will spill over into the New Year. But he expects stocks to run out of steam soon after, precipitating a 10% to 20% sell-off that will make this summer’s 8% drop seem like a minor blip. In the second half of the year, Acampora looks for the bull to regain its strength, as economic growth, fueled in part by election year pump-priming, accelerates. Acampora’s advice to investors? Stick with the large-cap growth stocks that are currently in favor.


  44. mad97123 says:

    Let’s put it this way, Acampora was not calling for a bear at either turn, he had no insight into what was coming next.

  45. mad97123 says:

    “Then Acampora got a bit carried away. “This could be the start of a ‘mega-market’ lasting 12-15 years, similar to the boom markets that followed the First and Second World Wars,” he wrote in early 1999, and said the Dow could hit 18,500 by 2006.”


    This seems like a bit more than overstaying the end of a bull – he’s calling for a new mega-market.

  46. Sunny129 says:


    One significant key point not taken into consideration, while comparing previous Bull/Bear markets to current one which started on March ’09.

    There was NEVER suspension of Mark to market accounting standard prior to 2009 in the history of US market. I am willing to stand corrected, if I am wrong on this stat.

    Doesn’t this matter any more or is that standard banished for ever?

  47. ancientone says:

    My “bad feeling” is based on the information I have seen on your and other insightful blogs and articles about what is going on in our country. If you can describe a scenario that leads to general prosperity coming out of present conditions and centers of political power, I would love to hear it.

  48. bonzo says:

    As the boomers start to retire, several things will happen:
    1) Government will be forced to cut the deficit to avoid inflation. Since the deficit is largely responsible for high profit margins (all those newly created dollars/bonds have to find their way to the pockets of the rich, and they do so largely via profits), this will cause profits to decline.
    2) Fed will raise interest rates in response to inflation. This will hit financials, due to smaller spreads, and hit all assets due to a higher discount rate.
    3) Household savings rates will go up, since the younger boomers are not prepared for retirement. Savings by the middle-class household sector represents money that doesn’t go into the pockets of the rich, and thus causes a decline in profits. This is why corporate profits were so low in the 1980′s despite a strong economy. Households were saving back then.
    4) Labor will regain some negotiating leverage vis-a-vis capital, which will put further pressure on profits.

    Bottom line: current earnings are unsustainable and stocks are way overpriced based on sustainable long-term earnings. The market could adjust gradually to this realization over a period of 10 years or so of very low returns (SP500 still stuck at 15000 in year 2020) or abruptly (SP500 dipping under 1000 again in the near future).

    There is no compelling reason to buy stocks now if you are a long-term investor. There is no scarcity of stocks. Stocks are pieces of paper that can be created out of thin out. They are the private sector version of the Fed’s printing press. Except unlike the real money created by the Fed, stocks are not legal tender and there is no mandate for the creators of these stock certificates to preserve their value. Laugh all you want about the Fed being corrupt. The Fed is infinitely more honest than the creators of stock certificates. The voting rights that go with stock are often laughable. Dividends are at the discretion of the board of directors and they can cut them entirely if they want. If things go wrong, stock holders are last in line after all the creditors have been paid. I’m not anti-stock, but I’m dazzled by them either, and neither should you be.

    The market is being driven by performance anxiety. Hedge fund managers cannot afford to fall behind the SP500 another year if they want to keep their assets under management, and thus their jobs. They are forced to gamble, because not gambling will have the same effect as losing. The only hope is to gamble big and hope to win. This is a recipe for a market crash at some point. The secular bear market will come to an end AFTER that crash, when there is revulsion not so much towards stocks as towards hedge funds.

  49. [...] Is the secular bear market ending?  (TBP) [...]

  50. [...] Is the secular bear market coming to an end?  (Big Picture) [...]

  51. Cooter says:

    A market crash needs a catalyst, especially in today’s investment landscape where markets are not irrationally overvalued. What asset class will generate the margin calls that will force stock owners to blindly liquidate? I just don’t see one.

    The compelling reason to buy stocks is because they are the claim on future profits of the corporate sector. Corporations have shown an unparalleled ability to increase profits in the face of significant economic stagnation. While their margins may not increase, their earnings should continue to grow as a result of slow but steady economic growth.

  52. Old Rob says:

    The key question for investors: Are you prepared to make changes to your portfolios?

    Yes; selling my losers at a higher price.

    No; not buying until QE goes away.

  53. Disinfectant says:

    As a contrarian, it is obvious to me that when Barry is even contemplating the notion that the end of a secular bear market occurs at multi-year highs, it is surely not the end of the secular bear market. Bear markets do not end after a 4-year, 135% run. If the secular bear market is over, then it ended in March 2009.

  54. derekce says:

    Probably one more downturn, that guys like Gundlach are expecting before a new secular bull. The recent secular bulls have been led by technological breakthroughs. The 1950/1960 bull was lead by interstate highways and commercial airlines. The 1980/1990s bull was led by the computer industry. You can certainly make the case that fracking technology and its big increase in cheap energy will lead the next bull. The only question is now or a little later.

  55. mad97123 says:

    Cooter, the fact that you can’t see a catalyst makes no difference. Ask a Greece citizen what their ‘catalyst’ was. A crisis of confidence does not need anything more than for people to wake up and say what were we thinking?

    Corporations have shown an unparalleled ability to increase profits in the face of unprecedented stimulus. They showed the same unparalleled ability during the housing bubble. Go back and look at earnings projections for 2008 in 2007. $100 X 15 ave PE and stocks were valued “just right” at 1500 if those earning were sustainable. You do remember how that movie ended right?

    You will likely have an opportunity to buy that income stream for less.

  56. Revaluer says:

    Hi Barry. Interesting post, ditto comments.

    The relevant question: is this a time to increase equity / risk exposure, or not (yet)?

    Well, historically, with Shiller CAPE10s at 23 or something, as is the approx. current level for the S&P500, you shouldnt expect juicy 10 year returns thereafter. So an increase doesn t seem to be justified. (It was justified four years ago, but that required unusual courage and acceptance of short term drawdown risk.)
    Which is not to say that you shouldn t currently allocate a significant portion of your portfolio to stocks, given the poor expected returns from bonds AND cash in coming years.

    These are probable outcomes, no certainties. The uber CAPE10 around 2000 > 40 was an historic outlier that may happen again in some form.

    No need to increase equity right now, probably there wil be a later better entry point.

    Is there much more to say?

  57. rd says:

    BTW – forgot to actually answer your question at the end:

    My portfolio is roughly a 60% equity to 40% bonds/cash split rebalanced periodically. I have had this ratio for a number of years and plan to leave it there. As I continue to work, contributions go in every two weeks as a dollar cost averaging process. Those contribution continued through 2008-2009 and helped my portfolio grow significantly over the past few years so our net worth today is significantly greater than in 2007.

    If I saw the market plunge to a single-digit CAPE value, I may push the portfolio to 80/20 for a couple of years as long as I would be comfortable I wouldn’t have to tap into it for a couple of years. After a couplefo years, I expect I would return to 60/40 for the long-run.

  58. Robert M says:

    I had to do an emergency clean up in my home over the weekend and came across the toys and electronics we bought for the kids. I looked at the toys, e.g Hot Wheels and thought how quickly they grew out of the thrill of them. Electronics which is what they moved into sit as litter; unusable even in nostaglia after 2-3 yrs. I made me realize that the changes to my portfolio are likely to be nil regardless of whether we are cyclical or secular; ending or beginning. The reason is a portfolio is something to be held over time. With the stock choices available I see no reason to change given how they are hitting the earnings inflationary price increases not met by consumer income(look at the grains and its still winter) and firing everyone in sight for most firms. then there is the continued building of commercial real estate next to empty buildings, which like the real estate boom years the only way(?) to make money still? So my portfolio remains in consumer goods where I have some dividend growth.
    What would change my mind and one way to put money in consumer pockets is a change in taxation towards corporations. Tax the shareholder not the corporations at distribution. This should bring back stocks as the primary mover of equities end the nonsense of most derivatives. (Wishing here) force the SEC back into doing its job.

  59. glasscock9 says:

    strictly speaking its impossible that we are at the end of the secular bear now. either the secular bear ended in March 2009 (and the last 115% gain were the first 4 years of the secular bull) or we have another cyclical bear ahead of us that will complete the secular bear, likely with the S&P in the 1100-1300 range. my opinion is the latter and the last 4 years parallel 1974-1977, and the next few years will be a downward churn like 1978-81.

    so this is pretty good news: either in middle of secular bull now or will be at the start of one in the next few years.

  60. Its Only Rock N Roll says:

    A very thought provoking question with several perspectives. If you have the access to someone who has experienced the end of a secular bear market, thus the birth of a secular bull, ask them how they felt when it occurred. Most of the folks who I have talked to recall that they don’t recall exactly when it happened. There was no revelation or bright light phenomenon. No moment of clarity or awakening. Oh it is easy to see in hindsight, not in real time though. What they will tell you is it just happened…unbeknownst to anyone… and no one really cared. Equities were so far off the radar no one talked about them or contemplated their historic context of price relative to value or anything else…they just didn’t care. That is what a secular bear market will do, they will change the psyche of investors to ambivalence. You can debate dates, values, interest rates, P/E’s, GDP’s, what other players are doing in the market place, etc…but the birth of a secular bull does not happen when everybody is wondering out loud if this is it. IMO, there is work to be done by this secular bear as behavior has not changed. You will not know when it ends because you will not care. Just my 2 cents.

  61. leveut says:

    1. from a data driven and empirical viewpoint, one must ask what the range of time periods for secular bear markets is. That the average is 14.5 years tells nothing about the possible range of time periods.

    2. “market valuations are fair”–from a data driven and empirical viewpoint, historically, what were pe ratios etc. during prior secular bear markets and were they considered “fair valuation” even though the secular bears had years to run

    3. “And there is a major caveat to this: The Fed’s extraordinary ZIRP/QE intervention creates an impression of inorganic gains. Without the unprecedented FOMC actions, I am unsure markets would be anywhere near current levels.” That is more than a major caveat. From a data driven and empirical viewpoint, has anything like that, in nature and magnitude, taken place in prior secular bear markets. And if not, is there any historical precedent for the 14.5 year average, belief in “fair valuations” so as to justify any conclusion about the possible end of the current secular bear market.

    4. From a data driven and empirical viewpoint, have prior secular bear markets ended with the market at “fair valuation”, however you define it.

  62. socaljoe says:

    What if the stock market advances by about 5%/yr over the next decade, but inflation comes in at more than 5%?

    Is that a continuation of the bear market, or the beginning of a new bull market?

  63. toward my earlier Post..

    “…How easy is it to change a flawed economic or governance system, such as our current 1.5-planets-and-counting forms of capitalism? Most of us would say it’s exceptionally hard, particularly when power is concentrated in a few incumbent companies with deeply rooted vested interests. The financial crisis is a prime example of too few people holding the reins.

    But this focused power may be a benefit, not a risk. Harvard professor Robert Eccles’ research spotlights the often overlooked fact that, “Globalization has concentrated economic power within a group of large companies who are now able to change the world at a scale historically reserved for nations.” Just under 1,000 companies account for half of the world’s market capitalization, Eccles notes. If they decided to act, the impact could be immense…”

    “…Top 1,000 Companies Wield Power Reserved for Nations…”

    “…With drone attacks, torture and drug money laundering, the interlocking network of the military-industrial complex and banking cartels continue the age-old Western pattern of colonization around the world. From Iraq to Afghanistan; from Libya to Mali, bloody resource wars are camouflaged behind the fear-based rhetoric of ‘national security’ and ‘humanitarian intervention’.

    Western societies are rapidly losing their moral center. The employment of reason in the majority of society now seems divorced from the basic capacity for empathy. Government war criminals walk free, while whistleblowers reporting their crimes are punished. Bankers who commit massive fraud are bailed out while taxpayers have their futures foreclosed. When a culture rewards selfish deeds and immunizes the criminal acts of its leaders, it skews the norm toward depravity. How has this happened? How is it that Western civilization has devolved into something like a global rouge state?…”

    a matter of Perspective, no?

    in a 1-9-90 Socio-Economic split, remember, the 90 is a Failing Grade..

  64. as He puts it..

    …If there was one commercial in the swamp of Madison Avenue goop, that actually

    —had an unintentional ring of truth, it was the ad for CBS’s sitcom 2 Broke Girls. The show is about two young waitresses, the whip-smart Kat Dennings and Beth Behrs, as they struggle through the Great Recession in Brooklyn. The ad had Dennings and Behr strip and pole-dance while the phrase 2 Broke Girls flashed in neon over their heads.

    —This is neoliberal America in nutshell: a place where there are those who strip and those who watch; those who serve and those who get served. This is an unsustainable state of affairs. The problem with widening inequality is that like the blackout, it really doesn’t matter whether it happened because there was too much electricity or not enough. It results with everyone sitting in the dark with no solution in sight.

    [Dave Zirin is the author of the forthcoming “Game Over: How Politics Has Turned the SportsWorld Upside Down” (The New Press) Receive his column every week by emailing dave@edgeofsports.com . Contact him at edgeofsports@gmail.com .]

  65. Hammer of Thor says:

    There is no point in trying to define what “secular” market we are in. The beginning and end will only be clear in hindsight.

    Take a step back and look at the chart of “secular” markets. What’s even the point? It’s because we have to feel like there is a pattern, and that we can predict it, when in reality it’s random.

  66. llchaves says:

    scares me how no one asks is the cyclical bull market coming to an end. Remember rates went from 15 to 0 the last 30 years, we will now be operating in reverse. If you want to see what that looks like I’d revisit the 1972-1982 chart of the SPX. There’s a lot of similiarities especially with a war that wasn’t paid for in our case 2 wars, excessive money printing by the fed. We shall see, history doesn’t repeat but it does rhyme

  67. [...] midst of a sustainable rally and that stocks are the place to be for the long-term — because hints that the bear market is at an end, because the “great rotation” into stocks seems not be a question of “if” but a question of [...]

  68. cdj says:

    I watched your show on cnbc with consternastion. How could you talk for so long about the dismal performance of forecasters and predict a few days letter the end of the bear market (by the way which bear market I have not seen it since 2009 started..)

    You lost some credibility points there..

  69. I made no such prediction. (I have not been on CNBC in over a year — are you confusing me with someone else ?)

    I did pose a question — Is the Secular Bear Market Coming to an End? — and then explored that question. I wrote after 14 years, we are closer to the end than the beginning. That is not a forecast, its basic math

    A lot of what I write is nuanced and complex, but not this post. Go reread this post EXACTLY — you know, what I actually wrote, and not what you imagined I said

  70. jack77 says:

    I agree. Looks like the secular bear has a big drop left in the cards before long sec bull starts.. My ? is how low do you think the p/e multiple will have to go before a real bottom is in. the past bottom was about 7-8 wasn’t it?
    I believe current p/e’s are “as u mentioned” way to high to call an end to bear.

  71. [...] Is the secular bear market coming to an end? (Big Picture) [...]

  72. [...] Monday, we looked at whether the Secular Bear Market was coming to an end? and discussed it on Bloomberg TV and Yahoo Finance. I am unsure its over, but barring a Japan like [...]

  73. [...] hate seeing myself misquoted, misinterpreted, or just misunderstood.My prior explanations (see this and this) about how Secular Bear Markets reach their final denouement was apparently too [...]