Bull Market Beset by Too Many Misconceptions
What have we learned in the one year since equities crashed?
This bull market has baffled.
Source: Bloomberg
It's been one year since equity markets bottomed, beginning an epic rally that confounded and caught so many by surprise. Some of the commentary questioning why the rebound even happened amid a worsening pandemic is perplexing, revealing a lack of understanding of secular bull markets and the concept of momentum even among the most astute market observers.
The problem is that much of the explanations rely on clichés (a 20% drop designates a bear market), assumptions (you can spot a bubble in real time) and market myths (why is the time the earth takes to orbit the sun relevant to stocks?) that often lead investors astray. A few observations are helpful in better understanding the move over the past 12 months, and what may lie ahead.