A Tale Of Two Bull Markets

It’s a tale of two bull markets. One part of the market is trading as you would expect with near depressionary economic numbers. The only description for the other part is “insane.”

In last week’s #Macroview, we discussed that “March Was Only A Correction” and not a bear market. To wit:

“The distinction is essential.

  • ‘Corrections’ generally occur over short time frames, do not break the prevailing trend in prices, and are quickly resolved by markets reversing to new highs.
  • ‘Bear Markets’ tend to be long-term affairs where prices grind sideways or lower over several months as valuations are reverted.

Using monthly closing data, the “correction” in March was unusually swift but did not break the long-term bullish trend. Such suggests the bull market that began in 2009 is still intact as long as the monthly trend line holds.

Tale Of Two Bull Markets, #MacroView: A Tale Of Two Bull Markets

As we concluded last week:

“There is a sizable contingent of investors, and advisors, today who have never been through a real bear market. (No, March was not it) After a decade long bull-market cycle, fueled by Central Bank liquidity, it is understandable why mainstream analysis believed the markets could only go higher. What was always a concern to us was the rather cavalier attitude they took about the risk.

What gets lost during bull cycles, and is always found in the most brutal of fashions, is the devastation caused to financial wealth during a ‘mean reversion’ process.”

It is the issue of a “mean reversion” that we want to delve into this week.