Updated
Through Dec 2021

Secular Cycle Dashboard

Mixed signals or confirming signals? There are four variables that determine whether the current secular stock market cycle is in bull or bear territory: price/earnings ratio (P/E), dividend yield, inflation rate, and bond yields. P/E is the pure measure of the stock market valuation level, especially when it is normalized for the business cycle. Dividend yield, directly related to P/E, is a confirming measure that helps to qualify distortions in reported P/Es. The inflation rate is the primary driver of secular stock market cycles. When the inflation rate does not confirm the market’s valuation level, there is likely a cyclical distortion rather than a secular shift or trend (early 2009 is a good example of this contrast). Bond yields, particularly since the 1960s, reflect another financial market perception of the expected future inflation rate. This makes bond yields a confirming measure for secular stock market cycles.