Bulls and Bears and Markets, Oh My!

On this site you can read about NAOI Dynamic Investment Theory (DIT), a fundamentally new approach to investing. DIT works because it takes advantage of market trends - buying into uptrend and avoiding or getting out of downtrends.

Therefore, as a part of our general investor education mission it is informative to look at Bull and Bear markets from 1929 to 2016 as shown in the following chart:


Bear markets are typically defined as a decline of 20% from a high while bull markets are defined as a risk of 20% from a low.

There have been 13 bear markets over the time span of the chart. Mot have produced declines of 20% to 50% and they have been much shorter lived than the bull markets. As can be seen from the chart, each time there has been a market downturn, it has come back to reach new highs.

I have spoken with many people today that are worried about the current long-term bull market that began in 2009. They wonder how long it can last. In terms of time, the current bull run isn't unusual especially when compared to bull markets of the early 80's and 90's, both of which lasted for more than 9 years.

Looking at history is informative but it is not always a good predictor of the future. Market dynamics changes and with them the causes of bull and bear markets. Today a new factor has been introduced into the environment in the form of Federal Reserve policy related to interest rates. It is hard to predict how this new market catalyst will affect prices moving forward.

In free-markets, government intervention is almost never a good thing and one reason is that its affects are unpredictable. It is for this reason and others that trading decisions in Dynamic Investment Theory are not made based on "expert" predictions and subjective forecasts. Rather, they are made based on empirical observations of what the market has done in the past, not based on "guesses" of what it will do in the future.

When will the current bull market end? The fact is that we just don't know and any "expert" prediction is just noise. Fortunately NAOI Dynamic Investments just don't care. When it stock market starts to crash, Dynamic Investments will automatically get out of the stock market and into cash or the bond market.

Read about NAOI Dynamic Investment Theory by clicking this link.