BBRG: Bull Market Beset by Too Many Misconceptions

Bull Market Beset by Too Many Misconceptions
What have we learned in the one year since equities crashed?
Bloomberg, March 28, 2021





Last week, I mentioned my frustration at some of the media coverage of the one year market bottom anniversary.  That annoyance became a full column, discussing five conceptual errors people seem to have about this current bull market:

12 versus 13 months: Why is the time it takes the earth to complete one orbit around the sun relevant to stocks? Between March 23, 2020, and March 23, 2021, S&P 500 Index gained 74.8%. If we add a single month to that time period, the gains fall to ~15%.

Recovery: When the price of an asset falls 34%, it requires about a 52% move higher to get back to breakeven.

Clichés: Why is a 20% drop designated a bear market? Has anyone tested the significance of this number beyond the simple fact we have 20 fingers and toes?

Externalities: Don’t assume the 2020 pandemic — or any non-economic externality — ended the bull market that began in 2013.

Rotating Buyers/Sellers: Buyers & sellers are not monolithic blocks. A different points in the cycle, differing buyers and sellers emerge.

Momentum: Why are Traders attracted to rising stock prices? They recognize price is a more reliable tell than the surrounding narratives.

Bull markets do not begin from bear market lows. The 1982 -2000 bull market did not start in 1974 any more than the current bull began in March 2009.

Cyclical versus Secular: No, this is not the 2nd year of a new bull market. Counter trend rallies and sell offs do not mark the end of longer-term secular trends. Look at longer-term forces underlying secular bull markets.

Can we all really spot a a bubble in real time? I tend to doubt that.


If this is the sort of stuff that interests you, the full column fleshes out these details.




I originally published this at Bloomberg, March 28, 2021. All of my Bloomberg columns can be found here and here


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