I predict this bull run will last 10 years and be followed by a 10 year long bear

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by johnhammondsexpenses

People who are jumping in now are doing so because they think things will play out like in 2008 where in 5 years everything had already gotten back to where it was and kept going.

Technically from where the S and P was 5 years ago (2.1k) you would still be up by 33% despite everything as it is 2.8k now. 6% is nothing to balk at and the main lesson first time investors have learnt is that even if you bought in August 2008 (1.2k) right before the biggest drop off, you would still be up 25% (to 1.6k) in August 2013. The issue only comes if you bought in 2007 at the peak in May 2007 at 1.5k, you would still be down to 1.3k in May 2013 and wouldn’t recover fully until 2013.

The risk doesn’t come from buying too early in a bear market when things can sour quickly, the risk comes from buying too late in a bull mark when things seem fine and nothing bad has happened yet. Provided you still have cash, if you start buying too early, all a crash does is mean you can buy even more.

The risk in a 2008 to 2013 time frame is one of catastrophic loss where they don’t have an opportunity to get back to where they were because they didn’t make it through the crisis. If you think a company will survive and you have a 5 year time frame

Something to keep in mind that the post 2000 bear market was a long bear, the bottom didn’t happen until 2003, in 2008 people thought things would work like that, but really the recovery was much quicker than 2000. People expect quick recoveries for the stock market, quicker than the economy, because of 2008. The economy was not doing that well in 2012, but the markets already were recovered. In contrast there was a tiny recession in 2001 that recovered fast while the stock market didn’t.

People say “oh but what if there is no recovery in the market, just look at Japan”, as if this isn’t something America has not had happen before, when in reality the America already has a “Lost Decade” if you look at the S&P 500, as it was 1.5k for the first time in 2000 and 1.5k again only in May of 2007 right before the other crash. Stocks in 2010 were still lower than 2000. People were reluctant to get back into the market long term for that reason.

My father constantly complains about the Walmart stock he bought in 2000 that didn’t rise above that until 2012, and didn’t stay above it until 2017 as a warning against buying stocks, but my parents are approaching retirement anyway so whatever experience they had is going to start leaving the common investor’s psyche.

With the stock market bubble of the 90s firmly behind us, some people not even being alive for it, people have an expectation of steady rises over time even if there are temporary losses. In 2010, people believed their stocks might be even lower in 2020, which even if you sold at the bottom of the pandemic, you would be up 1000 points since 2010. Whether people are rational to believe this is a different question, but people are far more confident in the stock market now that we haven’t had a multi-year long bear market in 17 years. The only time in the past 17 years you would be down from late 2002 – early 2003 would be the exact bottom in early 2009. What people have learnt is that if you buy low, then you have ample time to sell high just as long as you don’t panic and do it at a new low.

People now believe, unlike in 2010, that if you simply wait long enough you can get your money back. We had a bull decade to erase people’s memories of the bear decade of the 2000s. 1980 to 1990 AND 1990 to 2000 was a bull decade, while 1970-1980 was a bear decade. 50s and 60s was a bull. While the 30s and 40s were bears, with 20s a bull and the 10s was a bear, while 1900s was a bull. Don’t know before that. The thing about assigning an animal to the earliest decades is there was a lot more volatility back then so it makes more sense before 20s to talk about bull and bear years than long term bull and bears, plus I stopped using S&P and started using Dow Jones due to lack of data.

Still with the exception of the great depression, we tend to have 20 year bulls to 10 year bears, and I think the reason is that people’s psychology over what the next decade will do is influenced by what the previous decade did. After 10 years of bear people will speculate less, which will be good for the market long term, while after 10 years of bull people will start saying stocks always go up in the long term, leading to stupid decisions not being punished, which is bad for the market in the long term. Unless you know there is a world war going on, which explains why the 40s was not a bull. Thus what we should expect after 10 years of bull, is another 10 years of bull, but this one will be fueled by speculation that you can’t lose as people who have not been burned keep jumping in, until finally somebody like my father buys Walmart “because it is safe” at 68 in 2000 that doesn’t recover until 2012. However in the cycle we are 1990, not 2000, so get ready for irrational exuberance where the stock market has nothing to do with reality. Enjoy the ride but please trade responsibly so you don’t contribute to the irrationality, but remember “the market can stay irrational longer than you can stay solvent” even if that is ten years long.

TL;DR People now expect recovery in the long term because of the experience of 2008 wiping out peoples experience of the 2000s bubble that never recovered its peak (with inflation) until after the great recession.


Disclaimer: This information is only for educational purposes. Do not make any investment decisions based on the information in this article. Do you own due diligence.


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