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A Few Thoughts On Today’s Stock And Bond Markets


Still a secular bull equity market:

2000 through 2002 was a pretty painful bear market for the , and then 2007–2008 was just crushing. I don’t think most individual investors realize that the decade from 2000 to 2009 was the worst decade for S&P 500 returns (cumulatively) since the decade of the 1930’s and that—to make matters worse—that the S&P 500 was basically flat from March 2000 through late April, 2013.

The S&P 500 bottomed in March, 2009 at 666–667, but didn’t make a new all-time-high until Bernanke’s Taper Tantrum in 2013.

Yes you read that correctly. The S&P 500 didn’t solidly break out and remain above the March, 2000 and October, 2007 highs until late April–early May, 2013 and since that time, it has gone substantially higher.

What’s struck me about this current secular bull market is the lack of frenzied trading that accompanied the late 1990’s top in what is now called the dot.com bubble but what was really the large-cap growth outperformance. The last 4 years has seen large-cap growth stocks really trounce the rest of the “style-box” spectrum from small-to-mid cap and all aspects of value stocks (until last November 1, ’20, when everything but large-cap growth equity took off) but—in my impression anyway—nowhere near the frenzied,”I gotta be in” sentiment that accompanied the 90’s.

This is still a secular bull market in US stocks. It’s worrisome though that there hasn’t even been a 10% correction since Q4 ’18. It’s all about sector and style rotation now.

The question is then—given the low in March ’09 and the previous highs exceeded in late April ’13—is the secular bull market 13 years old, or just a little over 8 years old, and does it matter?

Clients’ equity positioning remains largely unchanged from this early April, ’21 “Top 10 Holdings.” Financials and non-US like Oakmark International have helped greatly this year while the #1 position for clients for the last 8 years—Microsoft (NASDAQ:)—continues to perform well relative to the S&P 500.

Readers should know not only are the S&P 500 and bumping all-time-highs, but Europe and many of the non-US global markets are poised to trade above their 2006–2007 highs and make all-time-highs.

Bond, Housing and Credit Markets:

It shocks me that somehow investors don’t think that there could be a 200 bp increase in the Treasury yield over a few year time period, and you’d have to consider the considerable chill that would put on the real estate market.

A 200 bp increase in the today would take the yield to 3.5%, so if we assume a “true, long-run inflation rate” of 1.5% that would mean that the 2% long-run “real” rate of return for Treasuries has been restored to equilibrium real returns. That’s just back to normal.

When I tell younger investors that the fed funds rate was 20% and the Treasury yield hit 15%, and mortgage rates were 10.5% in early 1980, under Paul Vocker’s Fed and Jimmy Carter’s…



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