Examining past market behaviour across the cycle, Citi’s Robert Buckland shows how we could be entering a three-year phase where the stock market moves in a gut-wrenching roller coaster fashion, that moderately rises over time.
So, if global equities have followed previous cycles remarkably closely so far, what do those cycles say will happen next? Figure 16 tracks the performance of the MSCI AC World benchmark through previous market recoveries. Month zero marks the bottom of the market. We then index 12 months after the low (ie now) to 100. The general message is that global equities surge higher in the first 12 months of a bull market, but in months 12-36 they grind higher — up 13% on average.
One year into a strong rally, we’re starting the ‘Equities Grind’:
(Via Citi, Global Equity Quarterly, Robert Buckland, 7 April 2010)
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