Not A Secular Bull, Maybe Just A Steer

Cam Hui | Mar 24, 2014 12:23AM ET

This is another post in the series about the question of whether we are experiencing a brand new secular bull market (see

The late 1930's to early 1950's analogue

Now look at this long term chart of the Dow. The stock market was range bound for most of that period until a new secular bull was launched about 1952:

Dow Jones Industrial Average

Here's my problem. The early 1950's were marked by extremely low P/E ratios in the single digit range, while today we are seeing P/Es in the high teens. The early 1950's was marked by a low interest rate regime, just as we have today. If this is truly the start of a new secular bull, how can we expect stock market gains that are typically seen in past episodes?

In my last post on this topic, I wrote:

When he puts it all together, my inner investor thinks that, if we are indeed seeing a new secular bull market, the extraordinary measures undertaken by global central banks in the wake of the Lehman Crisis has front-end loaded many of the gains to be realized in this bull.

True, the major averages have convincingly broken out to new all-time highs and it looks like a secular bull from a technician's viewpoint. However, valuation analysis suggests that this market is unlikely to see the same kinds of gains.
This market isn't a bull. It is, at best, a secular steer.

Disclosure: Cam Hui is a portfolio manager at Qwest Investment Fund Management Ltd. (“Qwest”). The opinions and any recommendations expressed in the blog are those of the author and do not reflect the opinions and recommendations of Qwest. Qwest reviews Mr. Hui’s blog to ensure it is connected with Mr. Hui’s obligation to deal fairly, honestly and in good faith with the blog’s readers.”
None of the information or opinions expressed in this blog constitutes a solicitation for the purchase or sale of any security or other instrument. Nothing in this blog constitutes investment advice and any recommendations that may be contained herein have not been based upon a consideration of the investment objectives, financial situation or particular needs of any specific recipient. Any purchase or sale activity in any securities or other instrument should be based upon your own analysis and conclusions. Past performance is not indicative of future results. Either Qwest or I may hold or control long or short positions in the securities or instruments mentioned.

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Written By: Cam Hui