Has the bear market come to an end? It is certainly hard to say. In January, I called for 10% down in U.S. equities, which is basically where we are now (7900 on the Dow vs. the present 7776). My view has been that we would break through 2002 and 1998 lows to the down side before this was over and we have done so. But are we going lower still?

In thinking about that question, a historical parallel from 1914-1929 might make for an interesting comparison. Take a look at the graphs below for the Dow from 1914-1929 vs. 1982-1999.



The two charts are very similar. From 1914, the Dow rose from 55 to over 380, almost 7 times. From 1982 to 1999, the rise was even greater, from 800 to nearly 12,000, more than 14 times! Given the fact that the Dow collapsed by 90% after 1929, one would have thought that trouble was in store after 1999. However, looking at the charts below, one can see that the markets have held up rather well in comparison to the Great Depression.

In both cases, in 1937 and again in 2007, the markets collapsed again by 50% after the chart period graphed. However, clearly, the market action in the 1930s was of a different class, 1929-1932 having been much more severe.

In my view, the secular bear market began in 1999 for large cap stocks making 1999 analogous to 1929 and 2007 analogous to 1937 as opposed to 1929. The Dow reached the 1937 peak again only in 1945.