Monday, March 3, 2008

The End of Bull Markets?

Although you won't find it listed on your calendar, we're approaching the anniversary of an epochal event. No, it has nothing to do with the NCAA basketball tournament. It's a different kind of March Madness: The end of the bull market that lasted for a generation and changed the way that Americans think about stocks.

When the greatest bull market in U.S. history started in the summer of 1982, only a relative handful of people owned stocks, which were cheap because they were considered highly risky. But by the time the Standard & Poor's 500 peaked in March 2000 amid a fully inflated stock bubble, the masses were in the market. Stocks were magical, a supposedly can't-miss way to pay for your kids' college, save for retirement, enrich employees by giving them options, and regrow hair. (Just kidding about the hair. Alas.) ...

I'm reasonably sure, though, that stocks are likely to outperform high-quality bonds in the long term - not much of an accomplishment in a world where 30-year Treasuries yield about 4.5%. However, I don't expect to be able to earn almost 20% a year for 18 years owning an S&P index fund. The long bull market was great. But it's not coming back- at least for this generation of investors. Get used to it.

read the article

A bit on the pessimistic side. For long term investing (30-50 years) the market still has a lot to offer.

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