Secular Market

Unlike the bull or bear market which coincides with changes in the business cycle, a secular market is more long term and is usually driven by strong, persistent factors. For example, many cite the 1982-2000 bull market as an example of a secular bull market (others would cite the 1966-1981 bear market as a secular bear market), where asset prices continued rising even though Black Monday, Savings and Loans Crisis, and the Asian Financial Crisis etc all occured during this period. Forces driving this include deregulation and liberalization of many sectors, the productivity gains from new technology, and low inflation. Critics contend that this period of expansion was fueled by a large expansion in personal and national debt and is actually a superbubble in credit.

The author of “Fooled By Randomness” believes that many millionaires who were minted in the 1982-2000 secular bull market by investing in stocks may have just been in the right place at the right time.

Not only are secular markets seen in stocks, but they are also seen in currency, commodity and bond markets. British government bonds were in a secular market for the most part of the 1800s, only peaking around 1900. 1982-2000 saw a secular bear market in commodities as supply overran demand.

Grasping what is an important factor and what is not is difficult, as a secular market may move in one direction for a longer time than anyone expects.

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