The strategy works well in flat or declining markets, but
in secular bull markets where stock prices rise rapidly, the products mentioned above can underperform.
Not exact matches
The
market's valuation
in 2000 was so extreme that the resulting
secular bear has the potential to be more extended than others, unless the
market was suddenly to collapse to valuations near those
where historical
secular bulls have started (
where stocks have typically been priced to achieve 10 - year prospective returns near 20 % annually).
We believe that commodities are
in a
secular bull market, and this is
where Canadian outperformance relative to the United States comes into play — nearly 45 % of the TSX composite index is
in resources; almost triple the share
in the U.S. Almost 60 % of Canada's exports are linked to the commodity sector, roughly double the U.S. exposure.
The following chart (from Too Little to Lock
In) provides a view of the sort of valuations we typically see at the beginning of
secular bull market advances, versus
where we are at present.
We've been
in a
secular bull market for several years,
where buy - and - hold can work.
For example, the
market was
in a
secular bull market from 1982 - 2000, experiencing a strong primary uptrend
where the Dow Jones Industrial Average increased over 10 fold from about a low of 800 to over 10,000.