During secular bear periods, markets tend to revisit prior cycle highs and then retest prior cycle lows several times over 15-20 years. With the Dow at its third cycle peak, now once more near its 2000 and 2007 highs, we are about to see whether this secular bear is ending early after just 13 years, or about to enter the next cyclical bear market. Does the economy feel lucky?
Mark Hulbert, The Hulbert Financial Digest, explains what historically happens when the market hits new highs. Here is a direct link.
One thing seems clear: if the US economy is supposed to break out into a new secular boom phase from here, the 2/3rds that is dependent on consumer spending is not likely to be much help. This morning we learned that not only did the US consumer have the biggest income drop in more than 20 years in January, but the personal savings rate has now plunged back to the anemic levels seen in 2007. This is the opposite of progress. Historically, secular bears end when debt levels have been worked down and savings rates have been built up. This chart is not going in the right direction.
Chart source: www.zerohedge.com
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