As Rally Nears Fourth Anniversary, Are Stocks Headed Up or Down?

March 9, 2013, one month from now, will mark the fourth anniversary of the current bull market. As of now, the past 47 months have seen the S&P 500 go from an intraday low of 666 --hit on March 6, 2009 --to a five-year high, delivering a hefty 125% return.

Most investors will mark this milestone with a degree of trepidation, given the increasing age of this uptrend. However, market sage, blogger and Fusion IQ CEO Barry Ritholtz will be taking an even longer view of things and is looking to say goodbye to a 13-year-old downtrend and lay the secular bear market to rest. "1966 to 1982 was the last secular bear market," Ritholtz says in the attached video. He adds that as much as we've had a nice bull market for the past four years, it has happened within a broader bear market — which started in March of 2000 with the bursting of the dot-com bubble. These trends-within-a-trend are the norm, not the exception, he says, and routinely deliver market-swings of 50% to 100%.

"What each of these rallies and sell-offs does is exhaust the patience of investors. It alienates mom and pop and leads us to the point where, eventually, enough people have walked away from equities that you get to the beginning of the next bull cycle," explains Ritholtz.

Which is exactly why this death of the secular bear call matters. It conflicts with the notion held by many market watchers that if/when the S&P 500 sets a fresh all-time high it will likely be met with a harsh sell-off that could eat up half the ground covered since the 2009 lows.

From Ritholtz's point of view, it's the exact opposite. "Each bull market is followed by a bear market, and each bear market is followed by a bull market." He adds that one of the key delineations that marks the end of a secular bear market "is when broad indices all make new highs." It is something he says isn't just likely to happen, "it's inevitable."

None of this is new to Ritholtz and, in fact, a recent column of his links to one of his secular bear market pieces from 10 years ago. That being said, he believes the next mega-bull trend could still be years away. However, he also concedes that "it's absolutely possible" that the next secular bull market has already started and has been chugging along since the aforementioned trough in 2009. In the end he feels that's probably not the case, since we are seeing investors return to stocks and have yet to see capitulation.

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