I have been discussing this over the past few weeks, so I was delighted to see Floyd Norris put it into great context:
“Rarely has a stock market been so wild and moved so little.
Over the last three months, there has been day after day of wild swings in prices. Stocks soar when it appears that Europe will manage to work out a rescue plan for Greece. They plunge when it appears the world may be entering a double-dip recession.
But the Standard & Poor’s 500-stock index has moved almost nowhere. An investor who spent the last three months in private contemplation, without any information about what was going on, could have emerged this week and concluded, from the stock market, that it had been a quiet time for all.’
What’s ironic (if that’s the right word) is that Norris is discussing short term trading. However, it is just as true for long term investing. What we have seen over the past decade is rising volatility and little in the way of forward progress. This is the nature of secular bear markets. (I have a great chart somewhere I’ll dig up for tomorrow).
Here’s the visuals he used in the Times:
Volatile, but Nearly Running in Place
NYT, November 4, 2011