Reality check for the big bounce

Standard & Poor’s 500-stock index has doubled the fastest it has since the Great Depression. The market is rallying, but will it last?

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    The market is bouncing back, but it may only be a cyclical improvement.
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I'm not sure what we'll call the now two-year-old and counting bull market when we look back on it. Lindzon calls it the "Inconceivable Rally". If it fails before making new highs and there is a decent retracement I'll vote for calling it "The Big Bounce" maybe.

The New York Times takes a look at the fact that even after the fastest doubling for the S&P 500 since the Depression, there are still many walking wounded from the last two boom-bust cycles for stocks...

For example, though most sectors of the Standard & Poor’s 500-stock index are now trading above their levels of March 2000, the overall index is still slightly below where it was then. And technology and telecommunications stocks — the market’s best performers leading up to the 2000-02 bear market — are still down around 60 percent, on average, from their peaks 11 years ago; blue-chip growth stocks are off about 35 percent.

What’s the moral of this story? Don’t count on a complete recovery anytime soon, said Sam Stovall, chief investment strategist at Standard & Poor’s Equity Research. “It could take 15 years for stocks to work off the effects of a major bubble,” he said.

When people ask where we are and whether or not "the rally is real" I try to take them one step back for the longer view. I explain that I believe we are in a cyclical bull market right now within a secular bear market that began in 2000. So yes, "the rally is real" but it may not be The Real Rally...if that makes any sense to you. I point to My Favorite Chart On Earth. I mention that we could be looking at 2016-2017 as far as when this secular bear ends. That timeframe would put it in line with the average lengths of previous secular bears.

Stovall points out a few prolonged recoveries away from the one we're currently zipping through. Working off hyper-valuations from a busted asset bubble takes time. Decades in some cases. This is a good reminder that although the indexes are getting the headlines, there are tons of stocks that are nowhere near the highs of the 2000 peak, let alone the 2007 one.

Source:

A Full Market Recovery? Don't Count On It Just Yet (NYT)

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