When we look at stock market cycles, we know the current bull market is getting old -- over five years old. However, if you look only at bull markets that follow at 30% decline, it is a very different perspective. The deeper the bear drop in the stock market, the longer and strong the bull recovery. Our stock market drop of 52% in 2008/9 was terrifying, but it did set the stage for an impressive bull run since then. Now, take a look at this chart:
Over the last 114 years, there have been 13 recoveries, averaging 8.8 years each. Of those 13 bull runs, 6 had a shorter duration than the current one, and six had a longer run. We're in the middle. However, because our 52% drop was substantially greater than the 30% minimum, one can easily argue that this recovery will be much longer and stronger than average.
I hope so!
But, please note one big difference: Never before have we sustained a major economic recovery on such a sea of debt -- except for the longest and strongest recovery of all, labelled 1942 above.
