Secular Bull Market 1982 - 1999

Ready Set GO!

The Dow Jones Industrial Average caught in a tight trading range from 1966 - 1982 was fueled and ready for a breakout to new highs. Ronald Reagan, the "Great Communicator" preaching lower taxes, less government and increased defense spending would ignite the economy and set in motion the largest secular bull market in history. The Dow Jones would post a gain of 1,300% from 1982 until late 1999. Investor skilled or "lucky" enough to ride the entire 17+ year secular bull run were rewarded with a 16.38% annual rate of return for their efforts. There would of course be a few bumps along the way including the Boesky insider trading scandal, Iran-Contra hearings, 87' Crash "Black Monday", Gulf War, and the Russian debt default (see Market Timeline).

The 1982 - 1999 secular bull market would see seven cyclical stages; four bullish and three bearish (see Table 1). Along the way the cyclical bear markets appeared big enough to stop the roaring bull market, but each would fail allowing the Dow to surge to record highs. The brokerage community pushed investor to take advatage of these cyclical bear markets popularizing the phrase Buy-on-Dips. In fact during strong secular bull markets investors should take full advatage of the dips. Investors willing to look at market history will quickly recognize that the Buy-on-Dips mentatility fails during secular bear markets. It's all about proper perspective.

The chart, tables and timeline below will provide a complete overview of the 1982 - 1999 secular bull market.

Chart 1: Dow Jones Secular 1982 - 1999 Bull Market

Table 1: Secular/Cyclical Market Review:

Market Timeline 1982 - 1999:

The supply-side economics of the Reagan presidency fueled the US economy in the early 80's, setting the stage for the strongest secular bull market in history. In total the Dow Jones would pass through nine separate 1,000 point milestones by the end of the century. The milestone levels and dates are listed below in the market timeline.

• 1982 Savings and Loans are deregulated allowing the industry to enter into new areas of business in hopes of returning to profitability.
• Gramm-Rudman passes in December 1985, setting a series of targets for eliminating the federal budget deficit.
• January 28, 1986 The country mourns the crew members of space shuttle Challenger.
• The Ivan Boesky insider trading scandal brakes in 1986. Boesky and pals Martin Siegle (Kidder Peabody) and Dennis Levine (Drexel, Burnham, Lambert) amass millions in profits with their insider scheme. After his plea agreement with U.S. attorney Rudy Giuliani in 1987, Boesky proclaims, "Greed is all right ... everybody should be a little greedy." Gordon Gekko in the 1987 movie "Wall Street" claims that "Greed, for lack of a better word, is good. Greed is right. Greed works." Both Boesky and fictional character Gekko ended up in the same place, jail.
• Milestone 2,000: The Dow closes above 2,000 on January 8, 1986.
• Iran-contra hearing takes place in mid 1987 after it's reported that President Reagan had approved the sale of missiles to Iran in exchange for American hostages. Later evidence is found that proceeds from the arms sale were illegally diverted to "contra" anti-Communist guerrillas in Nicaragua.
• Late 1987 Congress attempts to bail out S&Ls with the FSLIC recapitalization bill. However the first serious attempt to clean up S&Ls did not come until Congress enacted FIRREA in 1989. It has been reported that a total of 1,043 institutions holding $519 Billion in assets were bailed out by U.S. taxpayers.
• On October 19, 1987 (Black Monday), the Dow Jones falls by 508 points or 22.6% in a single day. In total the cyclical bear that began in August and bottomed in November posts a month-end loss of over 31%. It would take the Dow a full two years to recover to new market highs.
• KKR's (Kohlberg, Kravis Roberts & Co.) acquires RJR Nabisco in a leverage buyout in 1988 for $31 Billion. Some view the LBO of RJR Nabisco as all that was wrong with corporate greed in the 80s. The movie Barbarians at the Gate tells the story of this successful but ill-fated merger.
• U.S. Invades Panama in 1989 arresting Noeraga for drug dealing.
• Iraq invades Kuwait August 2, 1990 prompting the Gulf War. The Dow falls 16% before basing a few months later in October. The U.S. begins military action against Iraq January 15, 1991 as the Gulf War officially begins. The war quickly ends in late February after Iraqi troops withdraw from Kuwait.
• Milestone 3,000: Dow ends above 3,000 for the first time on April 17, 1991.
• An unsuccessful coup against Gorbachev occurs mid August 1991. A few weeks later several Soviet States declare independence. In December 1991 the Soviet Union is dissolved.
• The bombing of the WTC on February 26, 1993 leaves six people dead, more than 1,000 people injured and damages in excess of half-a-billion dollars.
• December 1994, Orange County (CA) becomes the largest municipality in U.S. History to declare bankruptcy after the county treasurer had lost $1.7 Billion of taxpayer money's.
• The markets were little fazed by the Oklahoma City bombing (April 1995) as the Dow finished the year up over 33%.
• Milestone 4,000/5,000: The market passes to millennium markers in the same year; Dow 4,000 is hit on February 23, 1995 and 5,000 follows soon after on November 21, 1995.
• Milestone 6,000: The Dow hits the 6,000 level on October 14, 1996. Two months latter December 1996 Greenspan warns of "irrational exuberance" in the equity markets.
• Milestone 7,000: The Dow surpasses the 7,000 (February 13, 1997) and 8,000 (July 16, 1997) all in a matter of months.
• October 27, 1997 chaos on Asia's financial markets leads to a global sell-off. The Dow Jones Industrial Average falls 554 points - its biggest single day point drop. However, since the index has grown dramatically in size, this amounts to "only" a 7.2% drop in value. The Dow rebounds the next day to finish up 337 points or 4.7%. This minor sell off does not appear as a cyclical bear phase, in the end its just another buy-on-dips opportunity.
• Milestone 9,000: The Dow rises to 9,000 on April 3, 1998.
• Russia effectively devalues and defaults in August 1998 helping to spur on the cyclical bear market to a loss of over 16%. The market fully recovers in a few short months as the secular bull moved onto new record highs.
• Milestone 10,000/11,000: March 16, 1999 the Dow Jones breaks 10,000 for the first time. By year end the Dow had closed at a record high of 11,497.12.

At the end of the historic secular bull market (1982 - 1999) the Dow Jones generated an annual ROR of 16.38% for the entire 17+ time span. This impressive bull market would come to an end shortly into the new millennium as the dot.com bubble began to unravel.

>>> Click to view the next secular market in the Dow Jones covering the 1999 - Present period.

Note: other important milestone levels set by the Dow Jones Industrial Average include:

• January 12, 1906 Index closes above 100.
• March 12, 1956 Dow's first close above 500.
• November 14, 1972 Dow tops 1,000.
• January 14, 2000 Dow peaks at 11,722.98.

Table 2: Annual Returns by Year:

Detailed Timelines for Other Secular Markets:

Secular 1949 - 1966 Bull Market
Secular 1966 - 1982 Bear Market
Secular 1982 - 1999 Bull Market
Secular 1999 - Present Bear Market

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