Here’s an update of a chart series I’ve occasionally shared that compares two secular bear markets — the current decline since the peak in March 2000 and the S&P 500 from its peak on November 29, 1968 to its bottom on August 12, 1982.
The first chart is a overlay of the index price for the two periods excluding dividends. At first blush, the 2000 secular bear looks like the more savage beast.
Now let’s adjust both for inflation using the BLS Consumer Price Index.
Most people, even first wave Boomers, don’t realise the savagery of that earlier 14-year decline other than perhaps a recollection of the decade of stagflation that started with the 1973 oil embargo. The chart illustrates how both bears behaved over the decade following their peaks and how the stagflation bear continued its race to the bottom for another three years.
It will be interesting to check back in three years to see who wins this battle of the bears, especially when the Federal Reserve ends its quantitative easing.
But what about a Total Return comparison?
If we factor in dividends, the earlier bear looks far better. After all, the dividend yield on the S&P 500 averaged 4.18% during those years compared to 1.82% since the market peak in 2000.
But when we adjust for inflation, the performance of these two secular bears is far more similar.
We’ll check back on this competition a few months after the end of the latest round of quantitative easing.