However, when we adjust for inflation, the 1970s bear drops well below the two 21st century bear markets. Inflation lowered the value of the 1970s contender by an additional 20 plus percent over the illustrated time frame.
Now let's look at a total return comparison with dividends reinvested. Interestingly enough, the post-Oil Embargo market is by far the top performer, closing in on break even. Our current secular bear is down 14.0%.
But when we adjust total returns for inflation, the picture changes dramatically. The spread between the four markets narrows, with the current market in the lead, down -20.9%, and the Great Depression still in last place, but with a statistically less grim -51.3% (those deflated of the 1930s bought more).
Here is a table showing the relative performance of these four cycles at the equivalent point in time.
For a better sense of how these cycles figure into a larger historical context, here's a long-term view of secular bull and bear markets, adjusted for inflation, in the S&P Composite since 1871.
For a bit of international flavor, here's a chart series that includes the so-called L-shaped "recovery" of the Nikkei 225. I update these weekly.
These charts are not intended as a forecast but rather as a way to study the current market in relation to historic market cycles.
by: Doug Short