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An Analysis of Secular Bear Markets
and Secular Bull Markets since 1900
From a historical perspective since 1900
there have been 3 Secular Bull Markets and 3 Secular
Bear Markets as shown by the tables below of the Dow and
S&P 500. As you can see during a
Secular Bull Market the Average Annual Return
(highlighted in red) is considerably higher than during
a Secular Bear Market (highlighted in blue). Thus the
long term Buy and Hold strategy that worked well in the
1980's and 1990's for investors may have not worked very
well during the Secular Bear Markets of 1906-1921,
1929-1949 and 1966-1982.
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Secular Bear
Markets vs Secular Bull Markets and Dow
Performance |
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Secular Bear |
Duration |
Avg Yearly Ret |
Secular Bull |
Duration |
Avg Yearly Ret |
|
Markets |
(Years) |
(Dow) |
Markets |
(Years) |
(Dow) |
|
1906-1921 |
16 |
1.58% |
1922-1928 |
7 |
17.20% |
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1929-1949 |
21 |
1.69% |
1950-1965 |
16 |
10.60% |
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1966-1982 |
17 |
1.59% |
1983-1999 |
17 |
15.30% |
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2000-? |
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Secular Bear Markets vs
Secular Bull Markets and S&P 500 Performance |
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Secular Bear |
Duration |
Avg Yearly Ret |
Secular Bull |
Duration |
Avg Yearly Ret |
|
Markets |
(Years) |
(S&P 500) |
Markets |
(Years) |
(S&P 500) |
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1906-1921 |
NA |
NA |
1922-1928 |
7 |
17.90% |
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1929-1949 |
21 |
2.34% |
1950-1965 |
16 |
11.40% |
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1966-1982 |
17 |
3.64% |
1983-1999 |
17 |
14.96% |
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2000-? |
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The big question is now are we in the
beginning stages of a 4th Secular Bear Market which
started in 2000. The average length of the previous 3
Secular Bear Markets was 18 years with a minimum of 16
years and a maximum of 21 years. Thus if you add 18
years to the year 2000 and take + or - 3 years on either
side then the next Secular Bull Market may not begin
until sometime in the 2015 to 2021 time period if we are
now entering a 4th Secular Bear Market. However I would
like to point out that even in a Secular Bear Market
there can still be Bull Markets lasting a year or two as
the longer term charts of the Dow show below.
Notice after the Secular Bull Market of
1922-1928 which was followed by a Secular Bear Market
from 1929-1949 that the Dow still had impressive gains
during the early to mid 1930s (points A to B) before
going through another Bear Cycle prior too and during
World War II (points B to C). This was then followed by
another Bull Cycle from 1943-1946 (points C to D).
However from the early part of 1937 (point B) until the
end of 1949 (point E) the Dow virtually had a net gain
of 0% as its basic overall pattern was a series of up
and down movements which pretty much cancelled each
other out.
Meanwhile after the
Secular Bull
Market from 1950-1965 the Dow once again went
through another Secular Bear Market from 1966-1982.
Notice after the Dow peaked in early 1966 (point F) that
it had a lot of upward and downward movements from 1966
through 1982 but it basically went nowhere and actually
was lower at the end of 1982 (point G) versus its peak
in early 1966 (point F).
Looking at the current chart of the Dow
shows that it has been exhibiting a choppy pattern
similar to previous Secular Bear Market environments
after experiencing a Secular Bull Market from
1983-1999. One has to wonder during the next 10 years
or so whether the Dow will continue to exhibit a similar
pattern that occurred from the mid 1960's through the
1970's in which it had a lot of downward and upward
moves but the overall net gain was negligible.
Even if we go through another Secular Bear Market
over the next several years there will still be plenty
of smaller Bull Markets and if taken advantage of
properly will still lead to some excellent investment
opportunities in the future.
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