BBRG: Bull Market Beset by Too Many Misconceptions

BBRG: Bull Market Beset by Too Many Misconceptions 1

BBRG: Bull Market Beset by Too Many Misconceptions 2BBRG: Bull Market Beset by Too Many Misconceptions 3

Bull Market Beset by Too Many Misconceptions
What have we learned in the one year since equities crashed?
Bloomberg, March 28, 2021





Last week, I mentioned my frustration at some of the media coverage of the one year market bottom anniversary.  That annoyance became a full column, discussing five conceptual errors people seem to have about this current bull market:

12 versus 13 months: Why is the time it takes the earth to complete one orbit around the sun relevant to stocks? Between March 23, 2020, and March 23, 2021, S&P 500 Index gained 74.8%. If we add a single month to that time period, the gains fall to ~15%.

Recovery: When the price of an asset falls 34%, it requires about a 52% move higher to get back to breakeven.

Clichés: Why is a 20% drop designated a bear market? Has anyone tested the significance of this number beyond the simple fact we have 20 fingers and toes?

Externalities: Don’t assume the 2020 pandemic — or any non-economic externality — ended the bull market that began in 2013.

Rotating Buyers/Sellers: Buyers & sellers are not monolithic blocks. A different points in the cycle, differing buyers and sellers emerge.

Momentum: Why are Traders attracted to rising stock prices? They recognize price is a more reliable tell than the surrounding narratives.

Bull markets do not begin from bear market lows. The 1982 -2000 bull market did not start in 1974 any more than the current bull began in March 2009.

Cyclical versus Secular: No, this is not the 2nd year of a new bull market. Counter trend rallies and sell offs do not mark the end of longer-term secular trends. Look at longer-term forces underlying secular bull markets.

Can we all really spot a a bubble in real time? I tend to doubt that.


If this is the sort of stuff that interests you, the full column fleshes out these details.




I originally published this at Bloomberg on Bloomberg, March 28, 2021. All of my Bloomberg columns can be found here and here


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