In the last 100 years, the US stock market went through four secular bull markets, three secular range bound markets and one secular bear market. In addition, we are currently in the fourth secular range bound market. I noted, in the parenthesis, the P/E ratio from which the corresponding market has begun its run.
(1906-1924) Secular range bound (16)
(1924-1929) Secular bull (11)
(1929-1932) Secular bear (19)
(1932-1937) Secular bull (13)
(1937-1950) Secular range bound (19)
(1950-1966) Secular bull (7)
(1966-1982) Secular range bound (19)
(1982-2000) Secular bull (9)
(2000-2011) Secular range bound (33)
Historically, secular bull markets start from relatively low P/E levels. How does today's P/E stack up against this record? Well, we are currently at 17. Consider that projections for future expected earnings are coming down, which would consequently have a negative effect on the P/E (pushing it higher). Therefore, as earnings come down, optimisms build into the prices should come down even faster in order to bring us to the historical levels of a potential secular bull start. Judging by where we are right now in terms of P/E and earnings direction, it does not look like a secular bull is coming any time soon.