The S&P 500 has been in a secular bear market since 2000 (8 years). The question is 'how much longer?' The secular bear that began in 1973 took almost 10 years before the market could sustain a break out.Thursday, April 10, 2008
The Secular Bear
The S&P 500 has been in a secular bear market since 2000 (8 years). The question is 'how much longer?' The secular bear that began in 1973 took almost 10 years before the market could sustain a break out.
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6 comments:
The rocket fuel is cash typically made by expanding debt. I think Debt will contract as a percentage of GDP for a number of years, which is not the same as simply contracting in dollar terms.
If GDP contracts - YIKES
If GDP expands we will still not see a lot of debt created.
So I just do not see the cash necessary to increase stocks for a number of years to come in the US.
BTW, I think your posts show a lot of insight IMO
Couple of thoughts.
Typically, in most of the places that discuss the "secular bear" and "secular bull" concept, the secular bear is generally thought to begin in 1966 as the 1966 level was roughly the same as 1982 so you had a 17-18 year secular bear, and generally secular bear markets end with stocks overall at single-digit P/E multiples (look at valuations in 1949 or 1982). If you use that measuring stick, we've probably got quite a way to go before this current secular bear ends (maybe around 2015ish).
I've kinda revisited and shifted my thinking on the whole secular bull/bear distinction. Instead of thinking in terms of secular bear or bull for stocks, it makes more sense IMO to think in terms of specific market cap/sector bull/bear markets.
Has there been a secular bear since 2000? Well, if you look at mega-cap stocks, and the financial and tech sectors which DOMINATE overall S&P 500 market cap, then yes, there has been a bear market. XLK is WAY below 2000 levels. XLF is roughly even from 2000. Alot of the mega-cap names like WMT, GE, MSFT, PFE, etc. which have a big impact on the S&P 500 have contracted from 50-60x earnings down to 15-20x earnings. Maybe they finally need to bottom at 10x earnings before it is finally over?
But if you look at small and mid-cap since 2000, or the energy and materials sectors since 2000 (which make up a small amount of S&P 500 capitalization) it has been a roaring bull market. There are numerous energy and material stocks that are 3,4,5, 10 baggers over the last 8 years. XLE is way up from 2000.
There is always a bull market somewhere. :)
If you haven't previously done so, you'll want to check out http://www.crestmontresearch.com/. Alot of good info on secular cycles.
Mike,
Good point and thanks for the link. You can throw Emerging Markets into the mix too.
Any guesses on what you think the next outperforming asset class will be? I haven't a clue.
These are great comments and posts...glad that you, tom k, are keeping up with this blog...personally, i'm not keeping up with reading the few blogs that I was reading.(Curious if Roger's large risk managed diversified approach avoided a big drawturn, and if so by how much.) Always a bull somewhere is probably true, except when everything is down, a serious collapse is likely. Something I heard over 20yrs ago..could have been richard russell who is back in the news w saying we are still in a primary bull mkt and that major indices are building good bases for resumption upward. Don Coxe...sure do like this guy but no one is the guru...thinks we are still in the early innings of a commodity bull...ag, gold, base metals. I've been playing with martin pring's longterm, intermediate term, and shortterm momentum indicators. Charted on wealth lab provided by fido. For TAA the intermediate cycle does a nice job of giving a green light to highest relative strength sectors. My WAG as to next asset class will be domestically....something boring and not real stellar. Meanwhile, my other WAG is that the ag group will expand with new technology and new equipment makers. DE may still be the single best bet
jasper
Hi Jasper,
Yeah, I believe Roger has navigated this bear market well. He was way out ahead of most commentators and took a defensive position quite early.
Curious as to what the current state of your intermediate term KST is signaling.
Intermediate weekly kst report:
.spx on 10 yr chart
Rolling over ever since 12/06
when highest high kst was at 71
lowest low was -116 7/02
currently at -70
in solid downtrend and below its 9ema
and has risen to "kiss" it
Short term weekly kst...is more bullish. Shows positive divergence and broke its downtrend, and above its ema..one week of sideways cautions a false breakout.
The .spx chart pattern similar to .dji; .mid; efa
nasdaq...bearish on both kst cycle kst indicators
.xax...bullish; both indicators above their ema's; but moving sideways
eem is the most interesting. Inter. kst broke its low in august of 2006 and in downtrend. All three cycles(long, inter and short) are in downtrend and have broken primary uptrend.Does this mean that eem will have to test its low in 2006? Could be and I think argues for higher risk if using eem per se.
ilf: my personal favorite for emerging, while price chart shows amazing reslience, rolling over still intact; Inter kst below its ema. There is negative divergence on all three kst cycles
jasper
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