"Hi David, I listened to your audio for the first time as a new subscriber. You mentioned this correction and then resuming the secular bull market. At the Chart Seminar in San Fran, Eoin said we're in a correction of a cyclical bull within a 12-yr secular bear and that the secular bear may continue for a while longer. Did I misunderstand you or do you and Eoin have different thoughts on this issue?

"Thank you for your time"

David Fuller's view Welcome to Fullermoney and thanks for an important question. There is no difference in Eoin's and my views on this subject although I prefer somewhat different terminology for the longer-term cycle.

The Fullermoney view, often repeated, is that we are currently experiencing a well-earned corrective phase within the cyclical bull market which we began to predict last October. For the US and most other western stock markets we have also discussed a longer-term valuation contraction cycle which commenced around 1999-2000, following a long-term cycle of valuation expansion which commenced following a valuation low in 1982. You can see this on a historic monthly chart of the S&P 500 going back to the 1950s, and this 20-year monthly chart shows the valuation contraction phase in more detail.

Valuation contractions do not occur in linear fashion but in rolling waves. Looking at the S&P 500, valuations have improved at the two major lows shown in 2002 and 2009, and are generally lower today than at similar levels earlier in this cycle. Obviously there are many factors in play which have a big influence on valuations, such as monetary policy and GDP growth or recession.

None of us can do more than guess as to what the future holds but I would not be surprised if the S&P ranged for a few more years, although probably with a higher bias than we saw in the earlier years. In other words, I do not expect the prior bear market lows to be retested and any further valuation contraction may be due more to modest GDP growth rather than market weakness. Of course not all S&P 500 shares are equal and some companies, including leading Autonomies, may continue to do considerably better in terms of corporate earnings.