Maybe Coronavirus Didn’t End the Bull Market
Every rally or bust has large counter moves that may not be a real break from underlying trends.
Bloomberg, April 1, 2020
Is the current externally driven crash a counter-cyclical rally, or does it signify the end of the secular bull market?
Thats the topic of today’s column. No, this is not an April Fool’s joke. It is a broad question that is not easily answered: Before you can guess if this is a new bull market, you have to ask if the post GFC, secular bull market ended?
Please do not point to a 20% drop or a 20% rally — as we discussed with technicians yesterday, that measure of bull and bear markets is just plain silly.
I look at cycles very differently. I have long believed traditional measures of bull and bear markets are wrong. My preferred measure of a secular bull market includes four factors:
1. A broad economic expansion, with rising corporate revenues + profits;
2. Rising stock prices making new all-time highs;
3. Improving investor sentiment, a willingness to pay more + more for each dollar of earnings;
4. Duration: Lasting a substantial length of time – years and decades.1
Regardless, today’s discussion trues to discern if the prior bull market is over, and what we should be looking at to make that determination.
It will likely be determined by how pandemic, and how fast it is brought under control.
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1. There are longer secular bull and bear markets with shorter, counter-trend (cyclical) moves. Think about all of the ups and downs in the secular bear market that lasted from 1966 to 1982, or 1982-2000 as examples.
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I originally published this at Bloomberg, April 1, 2020. All of my Bloomberg columns can be found here and here.
