Secular bear markets refer to economic conditions where stocks, real estate, commodities and the general economy are extremely volatile with a downward bias. This is caused by underlying fundamental forces of excesses that were created for long periods of time in the previous growth cycle. Secular bear markets differ from cyclical bear markets due to the fact that they have a long-running (15 to 22 year range) and well established fundamental and cycle driven downward trajectory in markets. They result in a change of behavior and perception among society towards investments and the financial system.
One of the main features of the easy money economy of the Roaring Twenties was that investors could take advantage of investment margin leverage of 90%. This leverage was the fundamental reason behind the sharp run up in stocks, and this leverage left investors susceptible to market selloffs, which would come to pass in later years. All secular bears start by a triggering event that begins the de-leveraging process of the previous growth cycle…..Read More