A Look Back in History: Bull & Bear Markets Since 1973

A look back at bull and bear markets since 1973 and how aggressive growth stocks have fared vs the S&P.


Hello and welcome to the Golden Eagle Eye on Stock Market segment. Robert Zuccaro, Founder & CIO of Golden Eagle Strategies, shares his 2022 market outlook along with some untold facts and stories about the economy, stock market and the aggressive growth investment style. Robert is a quant pioneer driven by a never-ending pursuit to identify the common threads of top-performing stocks in pursuit of superior performance. He is also a prolific writer and author of the book How Wall Street Reshaped America’s Destiny.

Today we look back at bull and bear markets since 1973 and discuss how hypergrowth stocks, or aggressive growth stocks, have performed vs the S&P. 

Let's turn our attention to the stock market. Since 1973, we have had six bull markets in every one of those bull markets S&P has risen by at least a hundred percent. In looking at the investment style in which we ply our trade, aggressive growth, it tends to go down more in bear markets and up more in bull markets.

Following the bear market of 2002, the one year gain of the Aggressive Growth Index was 69%. Coming out of the bear market in 2008, which was severe because in one year alone on a calendar basis, the Aggressive Growth Index dropped 46%. In the first half of this year, we dropped more than that in a 6-month period. The index fell by 47.1%. Now, after one year 2008, the index popped 68%. After the unusual bear market that we had in 2020, the one year gain was 122%.

In going back and looking at the gain for the S&P, it has gone up a lot less in its first year averaging a 30% gain. So in the first year of a market recovery, the Aggressive Growth Index should go up twice as much as S&P using history as a guide. Stock market forecasts tend to be a reflection of what the stock market has just done.

Stock market's been going down since January 3rd of this year. I have one report here. Stock markets will drop another 40% because of the debt crisis. Another report says the market will accelerate with a 20% decline over a short period of time. I don't believe any of those reports because most of the damage is done. It matters little how much the market goes down from here. If it goes down from here, it's not going to be more than 5%, possibly 10%, but the big prize is not how much the market goes down, but how much investors stand to make over the next year following the market bottom.

Now this is very interesting. Vanguard became very negative on the stock market and they expect over the next 10 years that we will get an average return from stocks of 3 to 5%. I think that forecast is very far off the mark. What is very unusual and has not been discussed yet is that we have had two bear markets in four years.

We had a bear market in 2020. Starting in January of this year, we had another bear market. So we've had two bear markets within the span of two to three years. That is a rarity in stock market history. You have to go back to the bear markets of 1969 through 1970, followed by a very severe bear market of 1973-74. We had two bear markets compressed into a three year time frame.

The outlook for the stock market became very negative in 1974, and what we ended up with in the way of return over the next six years - it was not a return of 3% to 5% each year. We ended up with a 17% average rate of return over the next six years. Coming out of this bear market, I think we will have over the next 5 years an average market return of 10%.

So I continue to remain very constructive. First quarter earnings are started to flow. As usual, the banks report first and the banks all reported lower earnings as they continue to take large provisions for future losses. And I don't know if these losses are going to materialize, but typically what happens is the banks over reserve, which allows them when the market turns up and the economy turns up is to release those reserves which enter the earning stream. So right now, the banks are being adversely impacted because they're concerned about a recession. As such, they are over reserving, which they typically do. Now, Goldman Sachs made a statement, and their statement is that they are making a massive overhaul in their structure, which means layoffs. Now, is that good or bad?

Good long term. This is how the capitalistic system works. This is what makes the capitalistic system great because businesses adjust. When their profits were expanding through last year, it was business as usual. Goldman Sachs was very happy with the way things were going through 2021.

They made no changes, but because they are under duress, FedEx is under duress. Their shipping volume contracted by 11% in August. Many businesses are under duress, so they turn an eye towards efficiency and the changes that they make today and throughout next year, two, three years from now will result in higher productivity. And when we have higher productivity, we have higher corporate profits. And when we have higher corporate profits, we have a higher stock market. Nothing has changed. This has been going on for 200 years.

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This transcript was generated by software and may not accurately reflect exactly what was said.

Please note, that the thoughts expressed in this podcast are those of the presenter. This is not, nor should it be considered an offer or a solicitation of an offer for investment.

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A Look Back in History: Bull & Bear Markets Since 1973

A look back at bull and bear markets since 1973 and how aggressive growth stocks have fared vs the S&P.

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