Long-Term Stock Market Cycles: Where Is the US Stock Market Now?

 

Long-Term Stock Market Cycles: Where Is the US Stock Market Now?

The US stock market doesn't simply experience short-term ups and downs; it follows long-term secular cycles that span decades. Understanding these secular cycles plays a crucial role in developing long-term asset allocation strategies for investors. Where is the US stock market positioned in its current cycle, and what movements might we expect going forward? Let's take a detailed look through the analysis shared by Fidelity's Jurrien Timmer.

Patterns of Secular Bull Markets and Our Current Position



The chart above shows the S&P 500 index's real returns (adjusted for inflation), comparing two historical secular bull markets (1949-1968 and 1982-2000) with the current bull market that began in 2009.

Key points to note in the chart include:

  1. Characteristic Patterns of Secular Bull Markets: Secular bull markets typically show very strong real returns during their first 10 years, with the 10-year inflation-adjusted compound annual growth rate (CAGR) rising into double digits.

  2. Deceleration After the Mid-Point: Following the robust growth of the initial 10 years, as the negative returns from the previous decade are excluded from calculations, the 10-year real CAGR begins to decline. The market continues to rise, but the return profile moderates from above-average to average and eventually to below-average.

  3. Conclusion of the Secular Bull Market: Historically, after about 18 years, the market transitions into a secular bear market, recording below-average returns or even negative inflation-adjusted returns for several years.

Current Market Conditions and Outlook

We are currently in the 16th year of the secular bull market that began in 2009. According to Jurrien Timmer's analysis, the cyclical bull market has entered its "middle age," and the secular bull market has reached its "golden years."

A notable characteristic is that over the past 16 years, the market has achieved above-average performance, driven primarily by US mega-cap technology stocks. According to the historical patterns shown in the chart, we are now entering the latter part of the secular bull market, and future returns may gradually moderate. However, it's important to note

Comments

Post a Comment

Popular posts from this blog

S&P 500 Annual Drawdowns vs. End of Year Returns Analysis (1950-2025)

Image
  S&P 500 Annual Drawdowns vs. End of Year Returns Analysis (1950-2025) S&P 500's Long-Term Growth Continues Despite Market Volatility The table above shows the maximum intra-year drawdowns and end-of-year total returns for the S&P 500 index from 1950 to 2025. This data provides crucial insights for long-term investors. In the table, red numbers indicate declines while green numbers represent gains. Key Data Analysis Long-Term Average Returns and Drawdowns According to this data shared by Peter Mallouk, the S&P 500 has recorded an average annual drawdown of -13.7% while maintaining an average annual return of +11.3% from 1950 to 2025. This clearly demonstrates that while markets experience significant short-term volatility, they maintain a steady growth trajectory over the long term. Notable Years Worst Drawdowns 2008 : During the financial crisis, maximum drawdown of -48.8%, year-end return of -37.0% 1974 : Maximum drawdown of -37.6%, year-end return o...
Read more

Analysis of US High Yield Credit Spreads: A Recession Signal?

Image
   Analysis of US High Yield Credit Spreads: A Recession Signal? One of the most important indicators to watch in the US financial markets is High Yield Credit Spreads. This metric serves as a valuable tool for detecting early signs of recession. Let's take a detailed look at what signals this indicator is currently sending. What Are High Yield Credit Spreads? High yield credit spreads represent the difference between yields on below-investment-grade bonds (rated BB or lower) and US Treasury securities. As these spreads widen, it indicates that investors are demanding higher risk premiums, which can be interpreted as a signal of increasing economic uncertainty. Current State of High Yield Credit Spreads in April 2025 The table above shows peak high yield spreads during periods of significant S&P 500 declines from 1996 to 2025. According to Charlie Bilello's analysis, US High Yield Credit Spreads reached 461 basis points (bps) in April 2025. While this level indicates marke...
Read more

History Repeating? Comparing Nasdaq Performance After Netscape vs ChatGPT Release

Image
  History Repeating? Comparing Nasdaq Performance After Netscape vs ChatGPT Releases The Internet Revolution and the AI Revolution have both brought significant changes to the technology market. According to a fascinating chart analysis by Bespoke, there are striking similarities between Nasdaq Composite movements following the 1994 Netscape browser release and the 2022 ChatGPT release. This comparison provides insights into where we currently stand in the AI revolution and offers clues about potential future market directions. Comparing Nasdaq's 3-Year Performance After Netscape vs ChatGPT Release The first chart compares the percentage change in the Nasdaq Composite index over 602 days following the Netscape release (December 19, 1994) versus the ChatGPT release (November 30, 2022). The blue line represents Nasdaq's movement after Netscape's release, while the red line shows the movement after ChatGPT's release. Notable observations include: The Nasdaq index ros...
Read more

S&P 500 Trailing P/E Ratio Analysis: Market Valuation and Investor Sentiment

Image
  S&P 500 Trailing P/E Ratio Analysis: Market Valuation and Investor Sentiment Current Valuation Status of the S&P 500 The graph above illustrates the fluctuation in the S&P 500 index's trailing 12-month P/E ratio over the past decade. As of May 4, 2025, the S&P 500's trailing P/E ratio stands at 25.1, exceeding both the 5-year average of 24.7 and the 10-year average of 22.3. This indicates that the U.S. stock market is currently trading at a premium compared to historical averages. The Significance and Importance of Trailing P/E Ratio The trailing P/E ratio is calculated based on a company's actual earnings over the past 12 months. This metric serves as a fundamental indicator for evaluating market valuation, providing investors with a crucial benchmark to determine whether the market is overvalued or undervalued. When the P/E ratio exceeds its historical average, it generally implies: Investors have heightened expectations for future corporate grow...
Read more

The Significance of S&P 500's Consecutive Rise: Evidence that the Worst is Over

Image
  The Significance of S&P 500's Consecutive Rise: Evidence that the Worst is Over An intriguing pattern in the U.S. stock market is once again capturing investors' attention. The S&P 500 index has recorded a rare phenomenon of rising for 6 consecutive days with returns exceeding 7%. When viewed through a historical lens, could this pattern be interpreted as a signal of market recovery? Today, we'll examine the significance of this phenomenon and its historical patterns using data from Carson Investment Research. Analysis of the S&P 500's Rare Upward Pattern The graph above shows the performance of the S&P 500 index from 1950 to the present on a logarithmic scale. The blue line represents the movement of the S&P 500, while the green diamond markers indicate signal dates when the index rose more than 7% over six consecutive days. As evident from the graph, such upward patterns have occurred very rarely throughout history. Since 1950, this has happen...
Read more

Analysis of P/E Ratio Changes for the Magnificent 7 Stocks in 2025: Tech Valuation Compression

Image
  Analysis of P/E Ratio Changes for the Magnificent 7 Stocks in 2025: Tech Valuation Compression Declining P/E Ratios of the Magnificent 7: A Shift in Market Trends? A notable trend is emerging in the U.S. stock market in 2025. The graph above, based on data from YCharts and analyzed by Charlie Bilello, shows the changes in Price-to-Earnings (P/E) ratios for the 'Magnificent 7' tech stocks from December 31, 2024, to April 17, 2025. The 'Magnificent 7' refers to Tesla, NVIDIA, Apple, Amazon, Microsoft, Meta, and Google (Alphabet) - the large tech companies that have been driving the U.S. stock market. Analysis of P/E Ratio Changes by Company Tesla: Extreme P/E Compression Tesla shows the most striking change. Its P/E ratio has significantly dropped from 198 at the end of 2024 to 118 in April 2025. While still very high compared to other companies, this approximately 40% decrease suggests investors are reassessing their expectations for Tesla's future growth. Th...
Read more

US Stock Market: Historical Pattern Analysis of 50% Recovery from Bear Markets

Image
  US Stock Market: Historical Pattern Analysis of 50% Recovery from Bear Markets Good News for Bull Market Investors: The Historical Significance of S&P 500's 50% Recovery from Bear Markets The US stock market experienced a significant correction in early 2025, but it has now reached a critical turning point, recovering half of its bear market decline. The chart above shows the S&P 500 index performance on a logarithmic scale from 1950 to the present, highlighting key signal points. Ryan Detrick, Chief Market Strategist at Carson Investment Research, provides a historical perspective on the current market situation through this data. A closer examination of the chart reveals that the S&P 500 index has now recovered 50% of its decline from 5,150 to 2,580. This pattern represents an important technical signal in the recovery process from bear markets, clearly visible on the logarithmic scale graph. The green diamond markers on the chart indicate the 50% recovery point...
Read more

One Of The Fastest Corrections Ever, Now What?

Image
  One Of The Fastest Corrections Ever, Now What? S&P 500 Returns After Quickest Moves Into A Correction (From All-Time High to 10% Off Peak) The U.S. stock market experienced a sharp correction in early 2025. The S&P 500 index plunged more than 10% from its all-time high in just 16 days. While this rapid decline has caused fear and anxiety among many investors, historical data suggests that such swift corrections often lead to equally impressive recoveries. Historically, the Fastest Corrections Tend to Bounce Back Quickly According to data shared by Ryan Detrick of Carson Investment Research, the S&P 500's fastest corrections—drops of 10% or more from all-time highs—have historically recovered quickly. The table above shows the S&P 500 index's fastest corrections from all-time highs and subsequent returns from 1950 to 2024. Some notable examples include: September 23, 1955 : Corrected 10% by October 11 in just 12 days, then gained 9.6% in 1 month, 17.7% ...
Read more

700 Years of Interest Rates: Understanding Global Economic Trends and Future Outlook

Image
  700 Years of Interest Rates: Understanding Global Economic Trends and Future Outlook The Long-Term Decline in Nominal Interest Rates Throughout History The graph above presents a remarkable dataset showing the evolution of world nominal interest rates (GDP-weighted) from 1315 to 2024 – spanning an impressive 700 years. This data, compiled by the Bank of England and Goldman Sachs Global Investment Research, offers profound insights into financial history. Examining the graph closely reveals a striking long-term downward trend: interest rates approached 20% in the early 14th century and have declined to near 0% in recent times. This trend reflects not merely modern monetary policy, but fundamental shifts in capital accumulation and economic structures over seven centuries. Historical Interest Rate Spikes and Their Connection to Economic Turmoil One of the most notable features in the graph is the historical periods of interest rate spikes. Particularly around 1365, rates soar...
Read more

The Bear Market Rally Trap: Understanding Sharp Rebounds During Market Downturns

Image
  The Bear Market Rally Trap: Understanding Sharp Rebounds During Market Downturns If you've been watching the stock market for any length of time, you've likely witnessed sudden, sharp price rebounds even amidst an overall declining trend. This phenomenon is known as a 'Bear Market Rally.' Today, we'll explore the characteristics of these rallies and what investors should be aware of when encountering them. What is a Bear Market Rally? A bear market rally refers to a sharp, temporary upward movement in stock prices during an overall downward trend (bear market). These rallies can often give investors a false signal that the market has bottomed out and started to recover, which is why they're sometimes called 'Sucker's Rallies.' The chart above shows bear market rallies in the S&P 500 index during the dot-com bubble burst from 2000 to 2002. Despite an overall decline of approximately 49%, there were several sharp rebounds throughout this per...
Read more