Sam Ro at business Insider recently posted “The Most Bullish Chart Your See Has A Big Stock Market Crash In The Middle Of It” in which he makes a very interesting statement:

“More and more Wall Street strategists argue we should think about stocks as being in the middle phase of a long-term, multiyear, secular bull market.”

He is correct. Over the past couple of years there has been a rising chorus of individuals warming to the idea of a new secular bull market. This is not surprising given the seemingly unstoppable rise of asset prices since the financial crisis despite a litany of geopolitical and economic headwinds.

Sam quoted Liz Ann Sonders who stated:

“Our view, which we have held since the market bottomed in 2009, is that the current bull market is secular, not cyclical. Secular bull markets — like from 1949 to 1968 and 1982 to 2000 — are extended bull markets characterized by above-average annualized returns and generally less-dramatic downside risk.”

That is the most important statement in the entire piece as it defines both the time frame and the context around which a secular market period exists. From this discussion we can do some comparative analysis to determine if the “ingredients” the spurred the previous two secular bull market periods exist today.

Then And Now

The following series of charts compare the two previous secular bull markets with the current market today. I have only provided commentary as necessary.

Valuations

As I discussed yesterday, valuations are currently pushing more than 27x earnings on a trailing basis using Dr. Shiller's cyclically adjusted methodology. At the beginning of each previous secular bull market valuations were in the single digits. I have notated when valuations have exceeded 25x trailing earnings which historically marked the peaks of bull markets rather than the beginning.

Here is another view of valuations and secular market periods for a better perspective of future expected returns. The yellow triangles note valuations where secular bull markets previously began. Importantly, note the market's behavior at the start of periods where valuations were 25x earnings are higher.