Secular bull vs bear market

I think it is best to start with the big picture.  I find in talking to friends about the market that most individuals have no idea how the markets really work.  All they hear about from the media is buy and hold  and stay the course.  I am going to put up some charts that will clearly show that there are times to be a buy and hold investor (secular bull market), and times when it is best to get in and out (secular bear market).  During secular bull markets, stock valuations expand, recessions are infrequent and fairly mild.  During secular bear markets the opposite happens.  Stock valuations contract because recessions are more frequent and more severe.  Lets start with the secular bear market charts.

Clearly buy and hold investors have not done very well for more then a decade now.  We are definitely in a secular bear market.  Lets look at another time period.

Hmm, buy and hold investing did not do much in this era either.  Just for fun, how about one more.

So clearly there are long time periods of little upward motion in the market.  If you are young and have a lot of time left before you need investment money, these time periods can be ridden out.  However, when in retirement or near it, these periods can be very rough.

Lets take a look at the last two secular bull markets.

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This is the granddaddy of all secular bull markets.  Even the traumatic crash of 1987 is but a blip.  Trying to time in and out of this market left many people behind. 

This secular bull market was clearly not as spectacular as the 80s and 90s.  However, upward progress was made until 1966. 

So here we are today in the midst of a secular bear market.  All the pundits on TV would have you believe the market is only going up from here.  Maybe so, maybe not. 

Part2