The question that most investors implicitly ask — what will the market do this year? — is the wrong one. A more useful question, and one that the historical record helps answer with surprising clarity, is: what phase of the long cycle are we in?

Equity markets do not trend upward at a steady rate. They alternate between extended periods of strong, sustained gains — secular bull markets — and extended periods of stagnation or modest growth — secular bear markets. These cycles typically last between 13 and 20 years, long enough to define the investment experience of an entire generation of investors.

Understanding these cycles, their historical characteristics, and their driving forces is among the most practically important knowledge for investors committed to long time horizons.

Defining Secular Markets

The terminology requires precision. A cyclical market move is a shorter-duration swing driven primarily by the business cycle: the typical recession-driven bear market lasting 12–18 months, or the recovery-driven bull that follows. Cyclical markets sit on top of secular trends like weather events within a season.

A secular market is a multi-decade trend in real, inflation-adjusted returns. A secular bull market is not simply one where prices rise — it is a period in which valuations expand as investors become increasingly willing to pay higher multiples for future earnings. A secular bear is not necessarily a period of falling prices but one where valuations contract, often producing flat nominal returns despite continued earnings growth, because investors are paying progressively less for those earnings.

The key driver of secular transitions is valuation. Secular bulls begin when valuations are depressed and end when they reach extremes. Secular bears begin at those valuation extremes and persist until valuations return to — or overshoot below — fair value.

The Historical Cycle: United States, 1920 to Present

The secular cycle in U.S. equity markets since 1920 has been remarkably consistent in its structure, even as the specifics of each phase differed substantially.

The Roaring Twenties Bull (1920–1929)

The first modern secular bull market emerged from the post-World War I industrial boom. Rapid electrification, the automobile revolution, and expanding consumer credit drove both corporate earnings and investor enthusiasm. The decade produced extraordinary returns — price appreciation averaging roughly 19% per year — before ending in the speculative excess that preceded the 1929 crash. By the peak in September 1929, the CAPE ratio had reached 32.6, an extreme reading that would not be surpassed for another 70 years.

The Long Bear (1929–1949)

What followed was the longest and most severe secular bear market in U.S. history. The Depression-era collapse was so severe, and the recovery so fitful, that investors effectively went two decades without meaningful real returns from equities. The nominal S&P 500 index in 1949 was roughly where it had been in 1929, though with dividends reinvested the picture was somewhat better. More importantly, by 1949, the CAPE ratio had been compressed back to single digits — laying the foundation for what followed.

The Post-War Bull (1949–1966)

The secular bull that began in 1949 was driven by extraordinary structural tailwinds: the baby boom, suburban expansion, the Interstate Highway System, the Cold War defense buildup, and America’s unrivaled global economic position. For 17 years, equities delivered annualized total returns of approximately 14.7%. Investors who participated in this period developed a generational faith in equities that would prove painfully misplaced in the decade that followed.

The Great Stagnation (1966–1982)

The secular bear that ran from January 1966 to August 1982 is the most instructive historical case study for understanding how secular bears work. The S&P 500’s price was roughly flat over 16 years — a nominal return that, after accounting for the double-digit inflation of the 1970s, represented devastating real losses. Yet corporate earnings actually grew during much of this period. What drove the poor returns was simple: valuations contracted. The CAPE that stood at 24 in 1966 was compressed to 6.6 by 1982 as investors rotated away from equities toward inflation-protected assets.

The 1970s produced an additional layer of complexity: two oil price shocks, Nixon’s abandonment of the gold standard, and Federal Reserve policy failures that allowed inflation to become entrenched. For long-term investors, the lesson is that secular bears can occur even when the underlying economy and corporate sector are functioning reasonably well. Valuation contraction is sufficient.

The Great Bull (1982–2000)

Few periods in equity market history match the 1982–2000 secular bull for sustained returns. Beginning from a CAPE of 6.6 and ending at 44.2, the entire secular bull was, at its most reductive, a story of multiple expansion: investors bidding up what they would pay for each dollar of corporate earnings. Annualized total returns exceeded 18% for nearly two decades — a generational wealth creation event for those who participated fully and consistently.

The bull was powered by genuine fundamental improvements: disinflation driven by Volcker’s Federal Reserve, the Reagan tax cuts and regulatory rollback, the productivity revolution enabled by personal computing and later the internet, and the peace dividend from the Cold War’s end. But the terminal phase was unmistakably speculative, culminating in technology sector valuations that could not be justified by any plausible future earnings scenario.

The Lost Decade and Beyond (2000–2013)

The secular bear that followed the technology bubble peak was relatively mild in historical terms — more stagnation than catastrophe — but no less disorienting for investors conditioned by 18 years of exceptional returns. Over 13 years, the S&P 500 delivered annualized total returns of approximately 2.8%, barely positive in nominal terms and negative after inflation. The CAPE contracted from 44.2 to approximately 20 by early 2013, still above historical averages.

The Current Secular Bull (2013–Present)

A new secular bull appears to have begun in approximately 2013, when the index conclusively broke to new all-time highs after the lengthy post-financial-crisis recovery. The subsequent decade produced exceptional returns, powered again by multiple expansion — this time facilitated by a prolonged period of near-zero interest rates and extraordinary monetary accommodation.

By early 2024, the CAPE stands in the 32–34 range — not at the 2000 extreme, but in historically elevated territory. Whether the current secular bull has further to run, or whether the valuation expansion of the past decade has borrowed from future returns, is the central question for long-horizon investors at this moment.

What Secular Markets Mean for Long-Term Investors

Several practical implications follow from a secular market framework.

First, the starting valuation matters enormously for multi-decade returns. An investor who began a 30-year saving program in 1969 at the tail end of a secular bull faced fundamentally different odds than one who began in 1982 at the start of one. This is not controllable, but it is knowable — and knowing it helps calibrate realistic expectations.

Second, secular bears, while psychologically devastating, are generally eventually resolved through valuation compression rather than economic catastrophe. The investor who continues systematic investment through a secular bear accumulates shares at progressively lower valuations, setting up outsized returns in the subsequent bull.

Third, and most counterintuitively: the best long-term returns tend to follow from the periods that feel the worst. The investors who accumulated equities consistently through the 1970s — when stocks were widely described as a “dying” asset class — were positioned for the extraordinary returns of the 1982–2000 bull. The investors who abandoned equities at the 2009 trough missed one of history’s great recovery periods.

The secular market framework does not allow investors to time the market. What it offers is something more valuable: a conceptual structure for understanding why long-term returns vary across different historical periods, and why the psychological resilience to hold through the difficult phases is the true source of long-term investment advantage.

Historical secular market data and return calculations based on Robert Shiller’s S&P 500 dataset (1871–present) and Dimensional Fund Advisors historical data. Secular market periods are approximate, with start and end dates representing approximate turning points. Past performance is not indicative of future results.