Guru: Secular bear market isn't over

MAY 05, 2013
By  DJAMIESON
The market has made new highs recently, but the secular bear market that began in 2000 isn't over, according to Ed Easterling, president of Crestmont Holdings LLC, and a guru of long-term market cycles. In a recent update to his popular research, he said that as of the end of March, the S&P 500 traded at a 22.4 price-earnings ratio using his 10-year normalized measure, a level that is fully valued given low inflation. “The low to mid-20s is normal with low inflation,” Mr. Easterling said. “But what you can expect from here is normal to below-average returns ... We're pretty far away from a [new] secular bull — five to 10 years, at least.” The 1990s bubble market became so far overvalued — reaching a normalized P/E of more than 40 — that it will take extra time to bring valuations back down to levels where a new bullish phase could start, Mr. Easterling said. Secular bull markets usually begin with a normalized P/E of about 10 or less, he said. “The market will probably chop around” from here, Mr. Easterling said.  “It doesn't have to go down 50%,” he said. “The market can stay here another decade while earnings come up” and valuations move down, Mr. Easterling said. Recent highs in the market recall 1972, when the Dow Jones Industrial Average made new highs almost a decade before a new bull market began, he said. The big risk now, though, is getting into either an inflationary or deflationary period, which will drive valuations down by taking stock prices lower, Mr. Easterling said. Whether this is a new bull market is just “semantics now,” said Doug Ramsey, chief investment officer of The Leuthold Group LLC, a research firm. “We would argue we made the secular lows on stock prices ... on March 9, 2009,” said Mr. Ramsey, who also pointed to the 1970s for a historical lesson. Although a secular bull market started in August 1982, the bear market lows were made in the fall of 1974, he said. “And that's exactly what we saw in March 2009,” Mr. Ramsey said. “I think now we'll see a multiyear base-building period that could last another four or five years.”

Latest News

The 2025 InvestmentNews Awards Excellence Awardees revealed
The 2025 InvestmentNews Awards Excellence Awardees revealed

From outstanding individuals to innovative organizations, find out who made the final shortlist for top honors at the IN awards, now in its second year.

Top RIA Cresset warns of 'inevitable' recession amid tariff uncertainty
Top RIA Cresset warns of 'inevitable' recession amid tariff uncertainty

Cresset's Susie Cranston is expecting an economic recession, but says her $65 billion RIA sees "great opportunity" to keep investing in a down market.

Edward Jones joins the crowd to sell more alternative investments
Edward Jones joins the crowd to sell more alternative investments

“There’s a big pull to alternative investments right now because of volatility of the stock market,” Kevin Gannon, CEO of Robert A. Stanger & Co., said.

Record RIA M&A activity marks strong start to 2025
Record RIA M&A activity marks strong start to 2025

Sellers shift focus: It's not about succession anymore.

IB+ Data Hub offers strategic edge for U.S. wealth advisors and RIAs advising business clients
IB+ Data Hub offers strategic edge for U.S. wealth advisors and RIAs advising business clients

Platform being adopted by independent-minded advisors who see insurance as a core pillar of their business.

SPONSORED Compliance in real time: Technology's expanding role in RIA oversight

RIAs face rising regulatory pressure in 2025. Forward-looking firms are responding with embedded technology, not more paperwork.

SPONSORED Advisory firms confront crossroads amid historic wealth transfer

As inheritances are set to reshape client portfolios and next-gen heirs demand digital-first experiences, firms are retooling their wealth tech stacks and succession models in real time.