Most Disrespected, Unloved And Disbelieved Secular Bull Market Since The Last One

Unloved Bull

That was an apt description of the sentiment surrounding the early years of the secular bull market that ran between 1982 and 2000. The bears thought they’d put the last nail in its coffin after the Dow Jones Industrials posted a 170% gain in the five years between 1982 and 1987, only to collapse a thousand points in the fall of ’87 to a five-year gain of only 70% (approximately 2700 back to 1700).

The media and pundits were singing dirges and hanging black crepe all over Wall Street. I mean why would you want to own a risky stock when you could get 9% guaranteed in a 10-year US Treasury Note? The answer was to be found in the fact that the Dow was to almost septuple over the next 13 (Dow 1700 to 11,425 — April 2000) years while, at very best, that bond would pay you $1.70 in principal for every dollar invested, Plus $1.53 in interest over the next 10 years = $3.23. Meanwhile your $1.70 in stocks would be worth over $11.40 at the end of that 13-year stretch, not including a very significant flow of dividend income.  Please forgive my somewhat awkward example, but I think you get my point. Regardless, the message from the media continued to be cautionary, suggesting the next big decline was just around the corner.

This is my second rodeo

My first one, the first secular bull market that I experienced in my career, was the 1982/2000 secular bull market. It lasted 18 years and I can assure you that most of the upturn, save the very end stage (the ‘I love stocks for the long-term’ stage), was met with extreme skepticism. The old saw attributed to Mark Twain, “history doesn’t repeat itself but it rhymes,” seems to hold true in comparing these two secular bulls. Here are a few fun similarities and dissimilarities to consider:

  • Huge fiscal stimulus was injected into the economy via the Reagan tax cuts and beefed up defense spending.
  • At the beginning interest rates and inflation were high and would gradually trend lower during the entire period.
  • “Spending during the years Reagan budgeted (FY 1982–89) averaged 21.6% GDP, roughly tied with President Obama for the highest among any recent President. Each faced a severe recession early in their administration. In addition, the public debt rose from 26% GDP in 1980 to 41% GDP by 1988. In dollar terms, the public debt rose from $712 billion in 1980 to $2.052 trillion in 1988, a roughly three-fold increase.[25]:143 The unemployment rate rose from 7% in 1980 to 11% in 1982, then declined to 5% in 1988. The inflation rate declined from 10% in 1980 to 4% in 1988.”
  • Of course in both instance, then and now, Congress was unable to cut social programs or defense spending, ergo BIG STIMULATIVE DEFICITS. In the case of the Reagan Tax Cuts the expected increase in revenues was not able to offset the Congress’ propensity to spend. This continues today. 
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Disclaimer: The information presented in represents my own opinions and does not contain ...

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