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100 years of Market Cycles

Market Analysis


1947-1948 Bear Market

The 1947-1948 bear market started in June 1946 and lasted for three years with the market losing around 25%. The bear market ended in June 1949.

Charts from stockcharts.com are used to analyze all of the market cycles that have occurred over the last hundred years. Analyzing the market cycles with charts gives stock investors a visual representation of how the stock market moves over time.

The Dow Industrial Average is used to analyze the 1947-1948 bear market and all market cycles prior to 1957 (The S&P 500 index was formed in 1957 and all market cycles from 1957 are analyzed using the S&P 500 index).

100 Year Market Chart

The following chart shows the 1947-1948 bear market on a 100-year chart with the Dow Industrial Average plotted as a monthly bar chart.

Chart 100yr: 1947-1948 Bear Market

The 1947-1948 bear market on a 100-year chart for the Dow Industrial Average plotted as a monthly bar chart.

As can be readily observed from the long-term 100-year market chart, the 1947-1948 bear market is just one of many bear markets that have occurred.

The 100-year market chart also shows a 240-month simple moving average which has spent most of the last hundred years trending upwards. This shows that over the long-term the market has broadly continued higher as the moving average followed the Dow Industrial Average higher.

20-year Market Chart

The following chart shows the 1947-1948 bear market on a 20-year chart with the Dow Industrial Average plotted as a monthly bar chart.

Chart 20yr: 1947-1948 Bear Market

The 1947-1948 bear market on a 20-year chart for the Dow Industrial Average plotted as a monthly bar chart.

A 12-month simple moving average is also plotted on the 20-year market chart. The 12-month moving average is a useful indicator used in Technical Analysis for highlighting market cycles.

As the 20-year market chart shows, the 12-month moving average initially followed the 1947-1948 bear market lower, but the moving average then flattened. While the bear market initially dropped in the first few months, the market then traded sideways until the 1949-1956 bull market started.

Most investors new to the stock market are under the impression that the stock market only moves in the direction of the current market cycle.

In reality, the stock market moves in cycles and alternates between bull markets (where stock prices broadly increase) and bear markets (where stock prices broadly decline).

Fortunately for investors, bull markets are usually longer than bear markets. This means that stock prices spend more time increasing in value than they do losing value.

Bull markets last anywhere from two years to around a decade, whereas bear markets are shorter and usually last a year or two and sometimes three.

5-year Market Chart

The 1947-1948 bear market is shown again with a shorter time-frame on a 5-year chart plotted as a weekly bar chart.

Chart 5yr: 1947-1948 Bear Market

The 1947-1948 bear market on a 5-year chart for the Dow Industrial Average plotted as a weekly bar chart.

The shorter time-frame provides more detail. As the chart shows, the 1947-1948 bear market initially plunged down, but then essentially moved sideways with a sequence of rallies and pullbacks for the remainder of the bear market

Market Chart: Rallies and Pullbacks

The 1947-1948 bear market is shown again with a 5-year line chart and two moving average indicators.

Chart MA: 1947-1948 Bear Market

The 1947-1948 bear market on a 5-year chart for the Dow Industrial Average plotted with a line chart and two moving average indicators.

The above line chart for the Dow Industrial Average shows a 52-week (long-term) and a 12-week (short-term) simple moving average.

The 52-week moving average (purple line) followed the bear market lower which bottomed in August 1921.

The 12-week moving average (orange line) broadly identifies the rallies and pullbacks that occurred.

The stock market sold down heavily from June 1946 (the first RH - which stands for Relative High) and hit a bottom in November 1946 (the first RL - Relative Low).

The Dow Industrial Average then made three rally attempts with each one failing and bringing the market back down to the November 1946 lows (first RL on chart).

The next rally from June 1949 ultimately saw an end to the bear market and started the seven year bull market from 1949 to 1956 which was spurred on by the rebuilding in Europe following World War 2.