This chart has always been quite compelling given the close proximity to which the current secular bear market (black line) has tracked against the average secular bear market through history (red line).
The values plotted are inflation-adjusted relative to prior secular bull market peaks.
Interestingly, the current secular bear has over-shot to the downside in each of the past cyclical lows in 2002 and 2009.
Additionally, it appears that the current secular bear has also over-shot to the upside at cyclical tops including both 2007 and what could be this year’s April high (LTRO induced?).
Currently, this analysis suggests the fair value of the SPX is somewhere between ~50%-55% of its peak value, or ~975-1,100, based on where the average secular bear has traded at this juncture post-secular bull top (+145 months).
Update: Below, we include the length, in months, of the SPX’s historical bull market cycles.
At 34 months in duration, the current bull cycle is the third longest within a secular bear market dating back to the 1870s.
Only the 37 month cycle from 1978-1981 and the 54 month cycle driven by housing from 2003-2007 have been longer.
Ironically, history’s three longest bull cycles (2003-2007, 1924-1929 and 1995-2000) all had similarly negative consequences or “payback” periods when they ended.