Courtesy of Doug Short.
Note from dshort: I received a request to post an update of my overlay of the 1968-1982 secular bear with our current market from the peak in 2000.
Here’s an update of a chart series I’ve occasionally shared that compares two secular bear markets — the current decline since the peak in March 2000 and the S&P 500 from its peak on November 29, 1968 to its bottom on August 12, 1982.
The first chart is a overlay of the index price for the two periods excluding dividends. At first blush, the 2000 secular bear looks like the more savage beast.
Now let’s adjust both for inflation using the BLS Consumer Price Index. As the next chart clearly illustrates, the era of stagflation in the 1970s decimated the real value of the earlier series.
Most people, even first wave Boomers, don’t realize the savagery of that earlier 14-year decline other than perhaps a recollection of the decade of stagflation that started with the 1973 oil embargo. The chart illustrates how both bears behaved over the decade following their peaks and how the stagflation bear continued its race to the bottom for another two years.
It will be interesting to check back in two years to see who wins this battle of the bears.
But what about a Total Return comparison?
If we factor in dividends, the earlier bear looks far better. After all, the dividend yield on the S&P 500 averaged 4.18% during those years compared to 1.82% since the market peak in 2000.
But when we adjust for inflation, the performance of these two secular bears is far more similar, and the real total returns over the same elapsed time puts the two in a virtual “dead heat” (no pun intended).
We’ll check back on this competition a periodically in the months ahead.
