Definition of a Secular Bear Market

A secular market trend is a long-term trend that usually lasts a decade or longer. Secular markets are seen not only in stocks, but also in currency, commodity and bond markets. Where a bull or bear market is driven by business cycles, a secular market is longer-term, and usually driven by strong, lingering factors. These secular bull and bear market trends have also been called “supercycles”.

While both bull and bear markets are most often fueled by sound economic data, they may also be driven by speculation and/or investor psychology. The stock market is, after all, controlled by people whose emotions and expectations play a large role in the direction of the market.

A bear market is a prolonged period in which stock prices fall. Unlike a “correction”, bear markets are usually accompanied by widespread pessimism and a recessionary environment of high inflation and unemployment. In a secular bear market, this weak sentiment produces selling pressure over an extended time period. Many cite the 1966-1981 bear market as a secular bear market (while 1982-2000 bull market serves as an example of a secular bull market).

While a secular bear market can contain cyclical bull markets, as long as each successive market low (expressed in constant dollars) is lower than the previous one, it is considered a secular bear market. When measured in ounces of Gold, the Dow has been in a secular bear market since peaking in late 1999.

Many market analysts do say that the way top prosper in a sustained bear market is in watching for the mini bull markets that can emerge. While a secular bear market may last for a decade or longer, cyclical bull markets may present themselves within this cycle for savvy investors to exploit.

Secular bear market would typically end when valuations fall to extreme lows, potentially marked by single digit P/E ratios. That said, if you compare the current secular bear market to those of the past, you could conclude that we are halfway (maybe less than that) through the current secular trend.

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The above information is educational and should not be interpreted as financial advice. For advice that is specific to your circumstances, you should consult a financial or tax advisor.

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