By John Reizner |
A long term bull or bear market in equities may last as long as 16 years, as was the case in the bear market from 1966-1982. That long term bear market included a deep 48% retrenchment in the Dow Average in 1973-1974. The market rose powerfully out of that 1974 bear market bottom, and stocks then traded in a range until the new dawn of the long term bull market beginning in August 1982 as a free market Reagan administration took over the reins of power.
A long term bear market in stocks such as the one referenced above may be punctuated by shorter term bull markets. Our market recently experienced a bull trend that ran from 2002-2007, when it rose to over 14,000. But the primary bear took over at that point and the Dow Average has collapsed to 7,216. The market may be finding a bottom as the extent of the recent decline of 50% is similar to the depth of the 1974 low.
However, the 1929-1932 example of an 85% decline in stocks could cast a shadow on hopes for a market bottom today. But today's massive inflationary monetary and fiscal policies underway to get us out of the mess in which we find ourselves may halt the market's decline short of the 85% decline achieved during the Great Depression.
That said, we may now only be in the ninth year of a long term bear market in stocks that commenced in March of 2000 and appears to be still running over the bull herd today. Should we find a market bottom in 2009 and embark on a significant stock rally, we could then trade in a range for several years before the next long term bull market may appear.
I believe that we find ourselves today under the Obama administration in a political environment of over-regulation and high government spending with almost no restraint, and an economy marked by high inflation, buoyant gold prices, and possible future oil shocks. This could be similar to the economic environment we had during the Jimmy Carter years as experienced in the late 1970's, an era of double digit inflation and interest rates, low stock levels and a bull market in gold.
Please see the following article posted on January 18, 2008: The Stock Market and Economy: A Return to the 1970's in Form?, and How Obama May Bomb the Stock Market in 2009-2010, posted on June 19, 2008.