Is it a bull? Is it a bear? A strategy for making the best of a market that’s both
So this is a cyclical bull market rally of potentially up to three to four years’ duration inside a secular bear market steady decline of potentially 10 to 20 years? That’s what I argued in my post of February 19 http://jubakpicks.com/2010/02/19/why-even-after-a-70-gain-this-is-still-a-secular-bear-market/
All right Sherlock, navigate that one for me and my portfolio.
The strategy is actually pretty simple. But the execution…
Well, it shouldn’t be too hard for anyone who combines the self-confidence and iron nerves under pressure of a Stonewall Jackson, with the sensitivity to rhythm and emotion of a Martha Argerich with the psychic powers of the three witches in Macbeth. (While I’m wishing can I have a flying horse and a dragon too, please?)
For the rest of us executing a strategy that can navigate a relatively short-term bull and a relatively long term bar might be a bit of a challenge.
A challenge. But not impossible. Let me start off by laying out the nature of such a strategy so that the challenge becomes clearer.
In my post of last Friday, I argued that we were still in a secular bear market—one that began in Mach 2000—and that could still have as much as another ten years to run even though we are currently in one of the great cyclical bull markets of all time. How else would you describe a rally that produced a 70% gain from the March 2009 low to the January 2010 high?
But I don’t want to rehash that argument here. In that post I promised that today I’d take my best shot at telling you how to navigate this bullish bear (or is that bearish bull?) Read more
Why even after a 70% gain this is still a secular bear market
This is still a bear market
Even though stocks, measured by the Standard & Poor’s 500 Stock Index, were up 70% from their March 9, 2009 low to their recent high on January 19, 2010.
Yep. Yes indeed. Absolutely.
If by bear market you’re talking about what’s called a secular bear market.
Strong market rallies—even three to four year cyclical bull markets—can take place inside a longer bear market trend. And despite the bull rally the long-term trend can remain pointing very strongly downward.
I think that’s exactly where we are now: in the midst of a strong cyclical bull rally that’s taking place in a long-term bear market down trend that began in March 2000 and could have another five to 10 years to run.
I raise this question and answer it this way not to scare you out of the market. Remember that even if this is just a cyclical bull market rally inside a larger downtrend such a rally can go on for as long as three or four years. (Although a cyclical bull is by no means guaranteed to go on for that long.) I don’t want you to jump ship just yet.
But I think understanding that we’re in a cyclical bull market rally inside a longer-term secular bear market is the best way to explain why this stock market feels the way it does, why so many investors still doubt this rally even after a 70% gain, and why it has been so hard to go along for the ride. Read more
Why this isn’t the start of another 10-year bull market
Absolutely brilliant table on Briefing.com this morning explaining why the rally off the March 9, 2009 low is a great short-term bull market but why longer-term the bear remains in control.
The jargon for those who care is that this is a cyclical bull inside a secular bear. The last great secular bull market stretched from 1982-2000, Briefing.com points out. And the conditions that produced that huge long-term running of the bulls couldn’t be more different from today’s fundamentals.
I think Briefing’s chart shows that more convincingly than a truck load of words. Read more
