secular markets

The Australian secular bear market.

With the ASX200 index now falling below the 2800 level, Australia now is technically in a bear market. With significant challenging economic concerns in the United States and China as well as the continued falling price of oil there is little likelihood of respite from a continuing bear market in the near future.

In the present economic circumstances this should be of little surprise to experienced investors because November 2007 was the start of a secular bear market in Australia. This current secular bear market is now in its eighth year and is still incomplete. Secular bear markets are periods of falling valuations and can be expected to be protracted by the effects of deflation and low economic growth. Both are evident in the current economic environment where markets will be driven lower by falling corporate profits and returns from equities for perhaps the next few years.

The… Continue reading

Factors affecting the secular markets.

This blog considers the factors which influence the secular market and is taken largely from recent newsletters by John Mauldin.  The data are for the American market but closely reflect the Australian secular market.

Secular bull markets are periods of rising valuations, while secular bear markets are periods of falling valuations. Stock market returns can vary widely and over the long term returns from the stock market have a high correlation with GDP and inflation. In the USA, GDP has a long term average of about 3% but it is suggested by some economists that growth rates over the next 5 to 10 years will be much lower, even as low as 0.4%. Even if GDP is as high as an optimistic 2% then the impact on market returns will be significant for investors.

Secular markets are not random and are not related to periods of war or… Continue reading

Bull market or continuing secular bear market for 2013?

In Australia we are now five years into a secular bear market. The question now  is whether we are now in a bull market phase or simply seeing a bear market  correction? Using Elliot wave analysis, the interpretation is that we are only  part way through this secular bear market. Certainly when one looks at the chart of the ASX 200, there is very strong resistance at about 5000 and this would  suggest that this current “bull market” move might run out of steam by about the  5000 point.

There is currently widespread belief that we are in a new  bull market. In fact there is too much agreement about this bull market. We need  to question whether this is really a bull market which is being driven by a  return to productivity or whether is simply a market which is… Continue reading

Deflation and the secular bear market.

We are now in a secular bear market which started in 2000 in the US but here in Australia it started in 2007. We are apparently entering a deflationary phase driven mainly by sovereign and corporate debt, the consequences of which are likely to be higher unemployment, low interest rates, low growth and low commodity prices.  These are all ingredients for a world recession.

A secular bear market will be protracted by the effects of deflation and low economic growth.    Markets will be driven lower by falling corporate profits. Returns from equities for perhaps the next decade are likely to be very poor.

Australian investors are much better off than their American counterparts.  The US investor is faced with zero bank interest rates and Treasury bond rates that are less than the rate of inflation has no alternative but to invest in equities.  … Continue reading

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