Adam Shell, USA Today: Cyclical Or Secular Bull Market?

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There are only two kinds of bull markets on Wall Street.  There are the normal ones that last roughly two years before petering out.  And there are the far less frequent mega-bulls that keep going and going, year after year after year, like the Energizer Bunny.

Why should Main Street investors care about the lack of variety when it comes to stock market cycles?  Because stocks have doubled in value since the current bull market began in March 2009.  That means this bull market will soon turn 2 years old, which is about the average lifespan of a “cyclical,” or short-term, bull market, Ned Davis Research data show.

History suggests the stock market is nearing an inflection point: Is time running out on the rally, or are stocks in a “secular” uptrend that will last many more years and make investors a lot more money?

Wall Street is split on whether this is the start of a winning run similar to the 1982 to 2000 period when the Dow Jones industrial average soared 1,409% — or just an ordinary bull market that will stall and morph into a new bear market, a period of falling stock prices.

“This is the real thing; this is a long-term bull,” says Laszlo Birinyi, president of Birinyi Associates.  “You want to be in (stocks).  We are due for a correction, but don’t get shaken out.”

There’s still a lot of money to be made, Birinyi says.  He doesn’t see a bear market — commonly defined as a drop of 20% or more — hitting in the next few years.  His bullish call: that the Standard & Poor’s 500 index will climb another 61% to 2100 by summer 2014.  It closed at 1307 Wednesday, up 93% from its March 9, 2009, closing low of 676.53.

Not everyone on Wall Street agrees with this upbeat forecast.

Don’t rule out another cyclical bear market before the stage is set for a largely uninterrupted multiyear run higher for stocks, counters Tim Hayes, chief investment strategist at Ned Davis Research.  The current bull market, Hayes believes, is of the more normal variety.  He says the monster rally doesn’t signal the start of a long-term bull market.  He thinks the market will take back some of the gains since the 2009 low.  The gains, he argues, have occurred within an ongoing long-term bear market that began in January 2000 when overpriced tech stocks crashed.

“It’s too soon to say the secular bear market has ended,” he says.

“Is this bull market almost over, or will it thrive for years?”, Adam Shell, USA Today, February 24

Great article by Adam Shell in USA Today.  He contrasts the views of those who believe we are in the early stages of a secular bull market with those who believe we are nearing the end of a cyclical bull market:

This is the real thing; this is a long term bull.

The market is fine.

– Laslo Birinyi, President, Birinyi Associates

The market is in the beginning of a secular bull market.

– Michael Farr, Farr, Miller & Washington

The bull market is younger than most people believe…. The U.S. is in the sweet spot of the economic cycle.

– Richard Bernstein, Founder, Richard Bernstein Advisors

It’s too soon to say the secular bear market has ended,

– Tim Hayes, Chief Investment Strategist, Ned Davis Research

There are plenty of issues that will overhang the market for years.

– Kevin Lane, CIO, Fusion Analytics

I have written about secular bear markets repeatedly over the last two years:

“Top Gun FP Client Note: Going With The Flow Into Year End”, December 10, 2010

“Top Gun FP Client Note: The Fundamentals Versus The Technicals”, July 15, 2010

Top Gun FP Client Note: Cyclical Tailwinds Versus Secular Headwinds”, June 5, 2010 – e-mail me (no link available)

“Top Gun FP Client Note: What If I’m Wrong?”, December 15, 2009

“Top Gun FP Client Note: The Forest And The Trees”, August 11, 2009

“Top Gun FP Client Note: A Secular Bear Market” , July 7, 2009

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