A twofer from the Wall Street Journal.
First up an article from August 13, 2009:
For economic historians and defenders of the Reagan revolution, this week will forever be seen as the anniversary of one of the greatest bull markets in history.And from Today's Heard on the Street column:
It was on Aug. 12, 1982, that the Dow Jones Industrial Average dropped to its 1980-82 recession low of 776.92—almost precisely where the Index had closed in January 1964. Starting as a trickle, the decline in inflation and long-term interest rates picked up speed that summer, and investors in common stocks began to have confidence that they were being liberated from the shackles of double-digit inflation and interest rates, an innovation-sapping regulatory regime, and a tax code that was antithetical to capital formation.
During that lazy summer, institutional and individual investors came to the conclusion that the back of inflation had been broken. Not insignificantly, they also believed that they had a friend in the White House.
When Henry Kaufman of Salomon Brothers said that Treasury yields had reached their highs in a note to clients on Aug. 17, 1982, stock prices exploded. This provided free-market optimists with desperately needed evidence that their principles would provide a path forward. The simple—yet difficult to achieve—strategy of getting the government out of the way and turning the economy over to free enterprise set the stage for a period of tremendous economic growth and wealth creation....MORE
After 30 Years: Raging Bulls to Aging Bulls
It was 30 years ago this week that the greatest secular bull market in history began. But is it a happy anniversary?Here are the yearly returns for the Great Bull. Don't drool.
Given the carnage of the past 12 years—the popping of the tech bubble and the worst financial crisis in modern times—some prognosticators say that even after recent gains we may still be in the early stages of a new secular bull market. Though it may not equal what we saw from 1982 through 2000, a pale imitation still would be welcome.
The best of times tend to follow the worst ones, but the most bullish soothsayers may not be looking back far enough. Even after all the damage that has been done since 2000, the preceding 18 years were strong enough to make the total return over three decades look remarkable.
"We are at the higher end of returns, so it's going to be nearly impossible to replicate the last 30 years in the next 30," predicts James Bianco, president of Bianco Research.
The S&P 500 Total Return Index has produced a compound annual gain of 11.32% since August 1982. The average return during the entire 20th century was 10.1%, according to "Triumph of the Optimists," a study of investment returns by Elroy Dimson, Paul Marsh and Mike Staunton. While it seems like a small difference, an untaxed pot of money invested in 1982 would be 28% lower today using the lesser rate. Most investors gladly would accept the long-run return right now. But another remarkable factor of the last three decades—a historic fall in bond yields—won't be repeated.
When it comes to inflation-adjusted returns, bond bull markets are a huge boon to stocks. Conversely, the opposite can create a huge drag. For example, the decades after World War II generally were a golden period for corporate America. But from 1946 to the autumn of 1981, benchmark Treasury yields went from their all-time low to their record high. And though stock indexes did well on paper, the S&P 500 rose just 0.63% annually in inflation-adjusted terms.....MORE
Table 2: Annual Returns by Year:
Dow Jones Secular
Bull Market 1982 to 1999