Market Talk

Lots of chatter about whether this fierce seven-week rally is the beginning of a new bull market.

While it’s probably too early to tell, FusionIQ CEO Barry Ritholtz says investors should ponder whether this recent run-up mirrors 1982 or 1974.  

Ritholtz notes the 16-year secular bear market came to an end in 1982, when the Dow settled above 1,000 on a permanent basis. While this could be 1982 all over again, he says the 1973-76 period may be a better precursor.

“The 23-month, 45% selloff was followed by 22-month, 76% rally,” he says. “I could live through that again, as long as disco doesn’t come back also.”

Justin Fox at Time’s Curious Capitalist blog also chimes in on the debate, agreeing that stocks seem to be resembling 1974.

He notes the market bounced back late that year and topped out in 1976 before remaining stagnant over the next six years. By 1982, stocks were considerably cheaper as earnings kept rising but stock prices failed to keep up.

“We haven’t hit the stocks-are-really-really-cheap moment in this bear market just yet (we had a stocks-are-pretty-reasonably-priced moment in March, but that has passed),” Fox says.

Of course a secular bear market doesn’t have to end this way. “But I bet it will before this bear goes away,” he says.

Stocks have risen more than 30% since March 9 and the S&P 500 yesterday broke into positive territory for the year before reverting back today. 

A 30% run-up has left many giddy about a new bull market, but to us, it would be prudent for investors to remain skeptical, especially when considering there were five similar bear market rallies during the Great Depression that all reverted back to new lows.