Chart of the Week: Tolstoy and the Markets



“Happy families are all alike; every unhappy family is unhappy in its own way.”

With due apologies to Slavophiles, the opening lines to Anna Karenina can also describe the market’s cycles. Bull markets are festive times and share the same cheerful qualities of growth and general prosperity. Every bear market, in contrast, is usually associated with some unique and dark defining characteristic: the oil shock, the tech bubble, the housing bust.

The last bear market was very unhappy indeed, particularly in those final days. The market plunged in 1Q as it began pricing in an economic decline last seen 80 years ago. When the market hit bottom, however, a repeat of the Great Depression was soon priced out and stocks have hardly looked back since.

Since the March bottom, stocks are now up 57%, well above the average 27% at this point in the last 10 major market cycles and easily setting a record for a new bull market. On this metric, stocks appear seriously overbought. Then again, on this metric, they’ve appeared seriously overbought pretty much since the bottom.

Just as the final plunge was so steep, that first leg up was extraordinarily powerful. Prior bear markets also sometimes ended with a bang, although sometimes it was a whimper. Likewise, when the last ten bull markets are reindexed to their respective bottoms, some of them began with a corresponding bang while others drifted along for awhile before really clicking in.

It might therefore make more sense to think of a bottoming process for the markets and begin measuring a new bull market’s progress once the idiosyncrasies of the preceding bear market have passed. For instance, if all the bull markets are instead reindexed to two months after their respective bottoms, the noise in the data subsides considerably. Moreover, the current bull moves more in line with prior market cycles, perhaps with many happy days still ahead.



The information presented in this presentation (the “Presentation”) has been prepared solely for informational purposes and is not an offer to buy or sell or a solicitation of an offer to buy or sell Interests or any other security or instrument or to participate in any trading strategy. No representation or warranty (express or implied) is made or can be given with respect to the accuracy or completeness of the information in this Presentation. No person has been authorized to make any representations concerning the Interests described in this Presentation that are inconsistent with the statements contained in this Presentation.