140 Years Of Bull and Bear Markets

Here are some interesting charts from Doug Short at Advisor Perspectives.

Are you aware that, from 1871 to 2009, the stock market was in a bear market for 40% of that time?  By definition, the market was in secular "bull" mode for 60% of the time.  Interesting, huh?  I grew up thinking that the stock market was a great place to lose money. (It still is!) I remember the bear market that lasted from 1967 to 1982.   That's 15 years of mostly down price action. The reason: inflation was rising that entire time and, toward the end of the period, interest rates rose up to 14% by 1981.

The chart below (click to enlarge) shows the inflation-adjusted S&P index and denotes secular bull and bear markets.  Notice, that we're still in a secular bear market since 2000.  The S&P 500 index has recently hit all-time nominal highs but not so after adjusting for inflation.  Technically speaking, this means that we've been in a secular bear market for 14 years, going on 15 years!   Maybe the bear market is about over given that duration?

Or, was the March 2009 crash bottom the start of a new bull market?  Time will tell.

S&P 500 Historical Composite:  Inflation-Adjusted Secular Highs and Lows

Here's another chart of the inflation-adjusted S&P 500 from 1871 shown with a linear regression trend line and variation from that trend line:

S&P 500 Composite Shown with Regression Trend Line

From Doug Short at Business Insider:

"Since that first trough in 1877 to the March 2009 low:

• Secular bull gains totaled 2075% for an average of 415%.
• Secular bear losses totaled -329% for an average of -65%.
• Secular bull years total 80 versus 52 for the bears, a 60:40 ratio.

"This last bullet probably comes as a surprise to many people. The finance industry and media have conditioned us to view every dip as a buying opportunity. If we realize that bear markets have accounted for about 40% of the highlighted time frame, we can better understand the two massive selloffs of the 21st century."