We're Only a Decade Into an 18-Year Boom
Yes, the bull market is still underway... Why the secular trend can last through 2031... How we'll know it's over for good... Exactly how far stocks could soar before then... Join Steve tonight for the full details...
There's a bull market underway... and almost no one sees it...
As I (Brett Eversole) explained in yesterday's Digest, the short-term trend is underway. We're in a bear market.
But at the same time, the very long-term trend is still going strong...
You might think that can't be the case – not with stocks taking a beating last year. But it's true... At the same time that we're in a short-term slump, called a cyclical bear market, we're still in a long-term boom period, known as a secular bull market.
The implications of this idea are huge. It explains why giving up on the market now could be a terrible mistake. And as I'll explain today, a quick study of history shows why the Dow could soar to 150,000 by the time this secular bull market ends.
Before we get to that...
There are two reasons I'm confident the secular bull market isn't over yet...
The first reason is the simplest: A decade is way too short for the secular trend to turn over.
Now, I admit, this isn't a complex idea. But when you're studying market cycles, simple is better. And if we study the secular bull and bear markets that have happened so far, something jumps off the page.
Here's the table I shared yesterday. Take a look at the length of the two complete secular booms we've seen since 1929...
The two complete booms are 18 and 19 years long. The current boom is just a decade old.
Simply put, we should expect this boom to last longer. A secular trend ending at the halfway point would be extremely rare.
This also makes sense when you look at a key psychological component of market behavior...
A secular bull market happens in two stages. The first stage is disbelief. That's where we've been ever since this boom began... After a decade-plus of dead money, no one believed the market could make a sustained move higher.
If you were an investor in the 2010s, you know that attitude was everywhere. Everyone was scared, pretty much the entire time.
The financial world as we know it nearly ended in 2008. Sentiment stayed bad for years, even as stocks went up and up. And whenever investors got overly excited, all it took was a 5% drop in stocks for everyone to run for cover.
We saw the most excitement in late 2021... when the Melt Up took hold.
But by early 2022, with stocks down less than 10% from their peak, the American Association of Individual Investors ("AAII") Sentiment Survey – which measures the attitudes of mom-and-pop investors – hit its most bearish level in nearly a decade.
Take a look... I shared this chart in the July issue of our True Wealth newsletter...
This is not what you'd expect at a long-term secular peak. You'd expect rampant enthusiasm. But it wasn't there.
Simply put, investor sentiment can't get to a truly manic secular peak in only a decade. It takes 15-plus years for folks to truly throw inhibition to the wind... And we're not there yet.
That tells me the length of the current cycle is simply too short. We can expect this boom to continue. And the ultimate peak will happen sometime early next decade.
The second reason the secular bull market will continue is more technical...
The market's very long-term trend is still up.
The typical long-term trend is a 10-month moving average, which is roughly the same as the better-known 200-day moving average. That's how we can see the current cyclical trend in action.
Given today's cyclical bear market, that trend is down. Take a look...
The 10-month moving average only tells part of the story, though. If we want to look at the very long-term, secular trend, we need a longer moving average.
The 50-month trend is a more useful time frame for identifying secular trends. And as you can see, it shows that this boom is still moving along just fine...
There's no doubt that 2022 was a rough year. Stocks fell, and we entered a cyclical bear market. And we even got close to the much-longer-term, 50-month moving average. But we didn't break that level.
Until we break the 50-month moving average and stay below it for several months, then the market is telling us the secular bull market is still in place.
So the secular boom isn't over. The current bullish cycle is simply too short for that... Plus, the very-long-term trend is still up.
What does this mean for investors?...
It means we're only halfway into a much larger boom... one that could mint more millionaires than any rally we've seen in our lifetimes. It will push stocks to heights few believe possible.
How high exactly? History gives us a good guide. We just need to figure out two things...
- How long this secular bull market will last
- How much stocks will go up per year over the life of the boom
The first piece is simpler than it sounds...
This secular bull market began when stocks broke out to a new high. Remember, that was in early 2013. We're almost exactly a decade into the current cycle.
As we saw above, past cycles have lasted 18 and 19 years. That means we should have the rest of this decade, at least, before we reach the ultimate peak.
To keep things simple, let's assume this boom lasts eight more years. That would put the peak sometime in early 2031.
Next, we need to figure out how much stocks can rise per year between now and then...
Our two previous secular bull markets led to annualized gains of 16% and 20% over the life of each boom. That doesn't mean stocks went up exactly that amount each year. But those were the compounded annual returns over the entire period.
With this as our guide, the current boom is well behind schedule. Stocks were only up 12.5% per year over the past decade. That's a great return compared with the market's overall history... But it's a slow pace for a secular bull market.
The odds are good that the market will pick up steam in the years to come... And the returns through the rest of this decade will make the returns of the last decade seem tiny.
As an estimate, let's say the overall secular boom hits the lower level of 16% per year by 2031. That's conservative in the context of history, but it gives us an outline of what's possible. And it leads to an incredible conclusion...
The Dow could jump to 150,000 by 2031... enough to turn a $10,000 investment into more than $44,000.
That's possible because stocks will have to post some serious "catch up" returns to hit a 16% annual gain for the entire cycle. They'll need to rise 21% per year for the next eight years.
That might seem impossible. But history proves it's completely within reason.
The implications of this are massive...
If you're like a lot of folks, the market of the past year likely has you spooked. Investing hasn't been fun lately. It has been painful. But that won't last forever.
Instead, the good times will be back soon. And they should last through the end of this decade.
If any of this sounds interesting to you, here's the next step I recommend...
Maybe you're a believer in my argument now, or maybe you're a skeptic. That's fine.
Either way, if you want to hear some more on the case for the Dow hitting 150,000 in less than a decade, this is part of the reason why Dr. Steve Sjuggerud has chosen to break his silence tonight.
He's sitting down to share details on his most recent market warning. And, to spoil the surprise a bit, it has a lot to do with this secular bull market... where stocks are headed next... which ones could soar and which stocks you should most avoid.
The event is 100% free to attend, and it will be chock-full of more details about the ideas I've talked about the past two days here in the Digest...
It begins in less than two hours, at 8 p.m. Eastern time tonight.
Tune in. Just for watching, you'll even receive the name and ticker symbols of two stock ideas... one you should consider buying right away, and one you should sell as soon as tomorrow's opening bell.
If you haven't signed up for the event already, register here to make sure you don't miss a minute.
New 52-week highs (as of 1/30/23): Arafura Rare Earths (ARAFF), Atkore (ATKR), BorgWarner (BWA), and iShares 0-3 Month Treasury Bond Fund (SGOV).
In today's mailbag, feedback on my Monday essay and more discussion about inflation... Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com.
"Brett, As a long time subscriber, I appreciate and agree with you and Steve. We are definitely still in a secular bull market. Last year with most indexes down about 20%, I was up 65% due to my Canadian energy picks. As a senior, I have seen a few bull and bearish markets in my time.
"The world's population is increasing and guess what, everyone wants what we in the affluent nations take for granted, such as a nice place to live, heat in the winter, a/c in the summer, plenty of food, a car or two in the driveway and good healthcare.
"There's more but I'm sure you get the picture. I will continue to focus on commodities, healthcare and some industrials but like you have said in any market you must be selective of trending sectors and specific stocks within." – Paid-up subscriber Michael G.
"In reply to Kelly F. re: inflation is now 1.8% [in Friday's mailbag], even if such is true, the damage from the previous rate of 10+% is not going away.
"Remember Einstein's conclusion about the eighth wonder of the world – compound interest, which is simply the other side of compounded inflation.
"And of course that number is a product of the govt's most recent scam on calculating the rate of inflation. What was the real number affecting us? 15%? 18%?" – Paid-up subscriber Robert B.
Good investing,
Brett Eversole
Jacksonville, Florida
January 31, 2023