NASDAQ 1970 To Present
We all love to be part of the prolonged bull market that could last up to 20 years, and create wealth that could last life time.
That’s exactly what happened in 1980 to 2000 after it broke out of the secular bear market in early 1980s.
But to able to ride the long-term trend (like 1980 to 2000) is not without dangers along the way to the top.
NASDAQ gained over 4,000% since 1980 to 2000, but during that 20-year ride, there were many sharp declines that will shake your core as you can see in the chart below.
This is not uncommon to see sharp declines when you are in a secular bull market–they are usually very fast and furious scaring people out thinking it is a start of a bear market.
But you noticed (chart below), the sharp declines, it never turns into a actual bear market, but rather, it quickly recovers it making it back to new all-time highs– at times, within several months!
What is the definition of a bear market: Persistent selling over the course of a year or more with the cultivation of lower lows and lower highs in the primary term.
Also, to recover from a real bear market, market usually will take 3-5 years to recover – three to five YEARS!!
Do any of those declines you see below takes 3-5 years to recover?
Do any of those declines you see happens over the course of a year or more with lower lows and lower highs?
People always ask me, when would you become a bear?
I will become a bear when the market gets into a REAL bear market, and we are not in it.
NASDAQ Log Scale
NASDAQ 1979 & 1980
I’ve depicted this chart because today’s decline is very similar to what we are seeing below.
- We saw -20% decline in late 2018 (so did in late 1978).
- We are currently facing -27% decline today (similar in 1980 March)
After seeing a abrupt -25% decline back in March of 1980, the market got back to new all-time high level by July of that year (it only took 3 months).
By the 1 year anniversary, the market was up 80% (since the lows).
Why did this happen in 1980s?
Because it was not in a secular bear market, but in a secular bull market.
NASDAQ 1979 – 1981
CONCLUSION
I don’t know exactly where the bottom is.
But I don’t believe this is the end of the bull market.
You can have conjecturing opinions regarding the virus and other fundamentals of why this could crash the market.
But I believe the likely scenario is very low.
I believe, once the selling slows down, the market could recover much, much faster than what most people are expecting it to.
