The following chart shows the inflation adjusted S&P Composite from 1871 through June, 2010. We highlight three secular bear markets and a fourth that may be forming. The rose colored arrows and months listed are the amount of time it took for the market to get back to its former high.
The following four charts show the individual secular bear market cycles outlined in the chart above. We have also added a second panel to each chart showing Shiller's PE10. We would point out that PE10 bottomed in single digits for the first three secular bear markets. During the current cycle, Shiller's PE10 has yet to fall to single digits.
The 1906 to 1920 Secular Cycle
The 1929 to 1949 Secular Cycle (which took the form of a contracting triangle).
The 1968 to 1982 Secular Cycle.
On the chart below of the current cycle beginning in 2000, we have included forward time projections based upon the three previous secular bear market cycles.
The following two charts use simple trend line analysis of nominal prices to confirm that the long term picture has changed.
First, the Dow Jones Industrial Average.
Next, the S&P 400 MidCap.
