Market Analysis
1973-1974 Bear Market
The 1973-1974 bear market started in January 1973 and lasted for one and a halve years with the market losing around 50%. The bear market ended in September 1974.
Charts from stockcharts.com are used to analyze all of the market cycles that have occurred over the last ninety years. Analyzing the market cycles with charts gives stock investors a visual representation of how the stock market moves over time.
The S&P 500 index is the industry benchmark and is used to analyze the 1973-1974 bear market and all market cycles from 1957.
The S&P 500 index was introduced to the stock market in 1957 and the index included back tested data to 1925 based on the historical prices of the stocks that made up the index. This provided historical data for comparison with the Dow Industrial Average.
90 Year Market Chart
The following chart shows the bear market on a 90-year chart with the S&P 500 index plotted as a bar chart with quarterly bars.
Chart 90yr: 1973-1974 Bear Market
Chart by stockcharts.com
As can be readily observed from the long-term 90-year market chart, the 1973-1974 bear market is just one of many bear markets that have occurred.
The 90-year market chart also shows an 80-quarters (20-year) simple moving average which has spent most of the last ninety years trending upwards. This shows that over the long-term the market has broadly continued higher as the moving average followed the S&P 500 index higher.
20-year Market Chart
The following chart shows the 1973-1974 bear market on a 20-year chart with the S&P 500 index plotted as a monthly bar chart.
Chart 20yr: 1973-1974 Bear Market
Chart by stockcharts.com
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 followed the 1973-1974 bear market lower with economic growth stalling, rising unemployment and surging inflation.
The 1973-1974 bear market cut short the preceding 1970-1972 bull market.
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.
3-year Market Chart
The 1973-1974 bear market is shown again with a shorter time-frame on a 3-year chart plotted as a weekly bar chart.
Chart 5yr: 1973-1974 Bear Market
Chart by stockcharts.com
The shorter time-frame provides more detail. As the chart shows, the 1973-1974 bear market was a severe bear market losing 50% in one and a halve years which was driven by investor concerns over another recession along with soaring inflation. The bear market started in January 1973 and ended in September 1974.
Market Chart: Rallies and Pullbacks
The 1973-1974 bear market is shown again with a 3-year line chart and two moving average indicators.
Chart MA: 1973-1974 Bear Market
Chart by stockcharts.com
The above line chart for the S&P 500 index 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.
The 12-week moving average (orange line) broadly identifies the rallies and pullbacks that occurred.
The stock market started its decline in January 1973 (noted on the chart with the first RH - which stands for Relative High). The first leg of the market sell down bottomed in June 1973 (the first RL - Relative Low).
The market briefly rallies until October 1973 (2nd RH) before the second leg plunged the market down until it bottomed in September 1974 (2nd RL). This was the bottom of the 1973-1974 bear market and the S&P 500 index then starts rallying with the 1975-1976 bull market.