Its Not The 1990’s Anymore

One reason we feel strongly about the Hybrid investment approach in today’s environment is depicted in the chart below. It shows over 200 years of “secular” or long-term trends in the stock market. We can see that secular bull and bear markets each have lasted between 8 and 20 years. A long secular bull market (and the greatest in terms of magnitude) ended in the year 2000. This is now common knowledge. However, history tells us that sub-par stock market returns could continue for some time. At the same time, market interest rates have been falling for 25 years. The possibility that this secular trend is reversing is an equal if not greater consideration in portfolio strategy today. This is why Hybrid strategies make so much sense to us. They may have the ability to persevere through difficult environments for stocks, bonds or both. Put another way, “there’s always a bull market somewhere.” That somewhere could be in convertible securities, arbitrage strategies or even in shorting a major market (for instance, buying funds that short stocks will allow us to benefit from a falling stock market – i.e. a bull market for shorting. This shows clearly that the investor’s best friend now and always is FLEXIBILITY in the investment process.

Secular Bull/Bear Cycles

Source: Mike Alexander's book "Stock Cycles: Why Stocks Won't Beat Money Markets Over the Next 20 Years")