Agreed. This feels like the beginning of something big, and long term. All sorts of markets are out of whack. All asset classes have been in a bubble. Wealth concentration is at historic highs. Labor markets are tight despite the fact that labor force participation rates are at their lowest levels since 1977. While wages are rising and official unemployment is falling, we’re seeing homelessness explode. Deaths of despair continue to stunt our overall life expectancy. The class divide is now so enormous that there appear to be separate worlds of human experience that are inaccessible to each other. The past 40 years of the expansion of globalization seem to be coming to an end. Nationalism and xenophobia are on the rise everywhere in the world (probably linked to the reaction against globalization). American politics seem to be teetering on a brink. Really the political polarization is happening in every country globally.
None of this chaos is entirely new. If we were to take a brief tour of American history we would find the same themes in each epoch. Despite this chaos, markets rise and markets fall. Usually along some significant arc. There have been three secular bull markets since 1948, and two secular bear markets. We appear to be entering the third. Here are the inflation adjusted S&P prices from peak to trough of each secular bull and bear since 1948:
1948-1968 Bull S&P rises from 171 to 880 (+515%).
1968-1982 Bear S&P falls from 880 to 316 (-64%).
1982-2000 Bull S&P rises from 316 to 2437 (+771%).
2000-2009 Bear S&P falls from 2437 to 996 (-59%).
2009-2022 Bull S&P rises from 996 to 4785 (+480%).
2022-2034 Bear S&P falls from 4785 to 2100 (-56%).
https://www.macrotrends.net/2324/sp-500-historical-chart-dat…
One thing remains relatively constant throughout these secular trends–the compound annual growth rate is around 3% from peak to peak and trough to trough. This tells us something about where the bottom might be if we are indeed in a secular bear. The previous two bears lasted 14 and 9 years. Lets assume this one splits the difference and lasts a dozen years. If these trends hold then we can expect this bear to bottom around 2100 in current dollars sometime around 2034.
Bottom line is that the market needs to fall and fall a lot to get us back on the 3% + inflation economic growth trend line. I don’t think this “correction” is any where near worked out. Indeed, I’m quite concerned about my retirement prospects if we are in fact at the beginning of a secular bear market.
PP