I'd like to take some time this week and review a few Tharp Think basics. If you're an experienced trader or long-time reader of this newsletter, you should view this material as an important reminder, even if you have seen it before.
From a big picture standpoint, I believe we entered a secular bear market back in 2000. Secular bear markets historically last on average about 15-20 years, so we still have quite a ways to go with this one. Being in a secular bear market doesn’t mean that prices decline for 15-20 years; however, it does mean that the price-to-earnings ratio for the stock market tends to decline into the single digits by the end of the cycle. In between, there are multiple down market phases and bear market rallies. Rallies in bear markets can be some of the most dramatic around—look at what the markets have returned on a percentage basis since March 2009. The current bull market rally, however, may be nearing an end soon so the simple steps below take on some importance.