“Lions and tigers, and bears, oh my!”
Dorothy in The Wizard of Oz
It seems appropriate to begin with a refrain from the Wizard of Oz this month. Though public equities provide long-term investing success, this “yellow brick road” has many twists and turns to navigate, and January, as with the period between February and March 2020, provides good evidence of that fact.
Many pundits are referring to the recent pullback a variety of ways: the beginnings of a secular bear, a reversion to “value” investing, the “January barometer” of a difficult year caused by long-term supply chain disruptions, and/or the potential for another “tech wreck” similar to 2000 … in short, all sorts of predilections and posturing. To top it off, Jeremy Grantham, noted perma-bear and co-founder of Boston-based asset manager GMO, came out warning of a super bubble in the US stock market and a subsequent 50% crash in market prices. Oh my!
Prior to the past decade, the last secular bull market ran from August 1982 to September 2000, with the S&P 500 index rising 1,364%, from 103.85 to 1,520.77 on the back of one the greatest economic expansions in US history. Yet, during this remarkable period of appreciation, there were three major corrections: the well-known “Black Monday” October 1987 30% “crash” lasting three months, the early ‘90s recession resulting in a 19% pullback, and the 19% pullback in 1998.