1949-1968: 19-year secular bull market
The great Post-WWII expansion: “The 1949-1968 secular bull market was driven by postwar economic growth, fading deflation fears, low inflation, the institutionalization of equity and the resulting leap in P/Es.” For me a great time: high school, Marines, Korea, plus a great education on the GI Bill.
1968-1982: 14-year secular bear market
Shilling says “inflation caused by huge Vietnam and Great Society spending dominated the 1968-1982 secular bear market as it pushed interest rates up and P/Es and productivity down.” Remember the oil crisis, recession and a long sideways stock market for over a decade. I was on Wall Street with Morgan Stanley working on troubled banks, corporate and developer restructurings. Evaluated the collapse of the Federal New Towns Development Program for HUD. Long recession. No fun for most investors
1982-2000: 18-year secular bull market
With Reaganomics: “The unwinding of inflation generated the 1982-2000 secular bull market, aided by the consumer spending spree and, finally, dot-com speculation,” says Shilling. And oh how we loved stocks with 30%-plus returns, some even posting 300% annual returns. We went crazy. “This time it was different.” Barbers offered investment advice and neighborhood barbecues were abuzz with early retirement plans.
2000-2020: Yes, a 20-year secular bear market till 2020
“the speculative investment climate spawned by the dot-com nonsense survived. It simply shifted from stocks.” Our retirement, “pension and endowment funds have been increasing their exposure to alternative investments such as commodities, foreign currencies, hedge funds, private equity, emerging-market equity and debt and real estate” in recent years. Yes, the ‘90s insanity did survive, like Frankenstein, transplanted in a new body by the White House, Treasury, the Fed, Wall Street, and our dogmatic, self-destructive conservative politicians obsessed about tax-cuts-for-the-very-rich.
“a secular bear market really started in 2000 and may persist for a decade as a result of slower GDP growth,” yes, persist till 2020 “with 2% to 3% deflation.” He warns: “Nominal GDP might not gain at all,” like recent flat-lining. Which coincides with the expectations of America’s professional financial advisers.
So where do you put your money for a decade-long risky secular bear market? Expect our “faltering economy will put more pressure on profits and stocks, and initiate chronic deflation, supporting current low Treasury yields … the dollar is rallying as economic weakness spreads abroad.”
Unfavorable investments include: major bank stocks, consumers and other lenders, domestic stocks, conventional home builders, consumer-spending sectors and risky, speculative investments. Challenges to all sectors.
And on the plus side: The U.S. dollar, and for the long-term, dividend-paying stocks, asset managers, Treasurys, North American energy, apartment REITs and factory-built homes.
One final piece of advice, stop listening to Wall Street’s self-serving ship of fools
