Crestmont Research examines how secular stock market cycles shape long term equity returns, valuation ranges, and investor expectations. The paper argues that starting valuations matter far more than economic growth, noting secular bear markets have historically lasted 12 to 20 years despite periods of strong earnings growth.
Understanding Secular Stock Market Cycles
Crestmont Research
Ed Easterling
Research
13 Pages
Key Takeaways
Valuation Cycles Matter: Secular bear markets since 1900 averaged roughly 17 years, with P/E ratios falling from above 20x to near 10x before durable bull markets emerged.
Returns Start With Valuation: Starting valuations explained nearly 80% of subsequent 10 year real returns, with periods above 20x P/E often producing flat or negative inflation adjusted performance.
Economic Growth Disconnect: Real GDP growth averaged about 3.3% across both secular bulls and bears, suggesting economic expansion alone does not guarantee strong equity returns.
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