I have written for several years that we are presently in the midst of a secular bear market for stocks that is likely to last for another 7 to 10 years. At this point, it is likely that we are at or nearing the end of this cyclical bear (that started November 2007) within the ongoing secular bear. And it is increasingly probable that we are now (or soon) on the verge of the next cyclical bull within this secular bear period.
But understanding the significance of the overarching secular bear is crucial to surviving and thriving over each business cycle. Key factors that must be understood are that cyclical recoveries within secular bears tend to be shorter and more muted than during secular bull periods; 2-3 year expansions are more common than the 3-5 year expansions of secular bulls. And cyclical bears during secular bears tend to be much deeper and last about twice as long as during secular bull periods.
Bottom line: buy and hold is reckless lunacy in these conditions. Efficient market theory will continue to be a nightmare for its disciples.
To understand more on the climate we are living through, watch this recent John Authers interview of bear market historian and author Russell Napier here.
Notice how he underlines that you don't need forecasting or perfect timing to prosper in these markets. You do need understanding with disciplined thought and method.
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Cory’s Chart Corner
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Danielle…can you recommend a good article explaining what a secular/cyclical bear/bull market is and it's characteristics. Like you said you often mention them, but I'm not entirely sure I understand them…at least not the secular/cyclical part.
Thanks
My book Juggling Dynamite, and ED Easterlings Book: “Unexpected Returns”
You can see it on my recommended reading list on the left side of the blog.
Hi Danielle,
You have been saying for sometime (until today) that you expect a correction from the recently market rally. From your comments today, does that mean you don't see that happening anymore? Do you expect the market to continue its up trend for the next little while? The stock market does seem a bit too optimistic regarding our current economic situation.
Thanks,
Kelly
Hi Danielle,
I was perusing your veneable park website and was amazed at the accuracy of the Tm Trendwatch newsletters. Can someone receive (or pay) for this newsletter in real time instead of viewing them 6 months after the fact? It's refreshing to look at the 'big picture' and focus on simply catching some of the upside and avoiding the majority of the downside. I never thought it was really possible to eliminate the white noise constantly spewed out by the industry. Thanks for your insights and have a great weekend.
Daryl
Kelly, I do think the rally since March 6 has been too far, too fast. Markets are now heavil overbought such that a 10%+ correction is probable.
Note I wrote about the prudence of taking profits in an earlier post this week.
The market can stay overbought for a while, but it has to scrub that off evetually either through a correction or two in the next few months or a longer sideways pattern as time catches up the the magnitude of recent gains.
Caution is warranted at these levels at least until the overbought is worked off.
Hi Daryl, no sorry we do not sell our newsletters as they are written for our clients.
But they are supposed to be posted with a 2 month lag to the archive, not 6, so we will try to get it updated shortly.
Otherwise the blog is meant to give more current insights to my readers.
Hello Danielle,
Do you think we will see the lows of 666 (S&P500) again this year? Everyone keeps saying this is a bear market rally. BUT…unemployement in the U.S keeps rising, housing has not bottomed, commericial real estate diliquencies will dwarf the sub-prime mess….so what gives with this rally. And I don't believe the U.S banks who reported a profit in Q1 something is very fishy.
Danielle, I have just viewed the Napier video. What ETF, or commodity, or other should we invest in today to profit from the rising inflation in 2-3 years.
Also, do you have an opinion on Don Vialoux's Technical Analysis article printed every Saturday in the Financial Post section of the National Post?
Dean
its a guess to say how long the final lows may be, or if we have already seen them in March. At this point, we see support at 800 as a downside test on the S&P. If it breaks that then the November lows are the next test area.
If inflation comes back then hard assets would break out again eventually. We also follow the TIPS and XRB carefully for signs of inflation. So far none showing though.