Is this bull market almost over, or will it thrive for years? By Adam Shell

 NEW YORK — There are only two kinds of bull markets on Wall Street. There are the normal ones that last roughly two years before petering out. And there are the far less frequent mega-bulls that keep going and going, year after year after year, like the Energizer Bunny.

                                                                                                  By Robert Deutsch, USA TODAY

The bronze bull statue, Wall Street's icon of prosperity, sits in place in New York City's financial district in lower Manhattan.

 Why should Main Street investors care about the lack of variety when it comes to stock market cycles? Because stocks have doubled in value since the current bull market began in March 2009. That means this bull market will soon turn 2 years old, which is about the average lifespan of a "cyclical," or short-term, bull market, Ned Davis Research data show.

 History suggests the stock market is nearing an inflection point: Is time running out on the rally, or are stocks in a "secular" uptrend that will last many more years and make investors a lot more money?

 Wall Street is split on whether this is the start of a winning run similar to the 1982 to 2000 period when the Dow Jones industrial average soared 1,409% — or just an ordinary bull market that will stall and morph into a new bear market, a period of falling stock prices.

 "This is the real thing; this is a long-term bull," says Laszlo Birinyi, president of Birinyi Associates. "You want to be in (stocks). We are due for a correction, but don't get shaken out."

 There's still a lot of money to be made, Birinyi says. He doesn't see a bear market — commonly defined as a drop of 20% or more — hitting in the next few years. His bullish call: that the Standard & Poor's 500 index will climb another 61% to 2100 by summer 2014. It closed at 1307 Wednesday, up 93% from its March 9, 2009, closing low of 676.53.

 Not everyone on Wall Street agrees with this upbeat forecast.

 Don't rule out another cyclical bear market before the stage is set for a largely uninterrupted multiyear run higher for stocks, counters Tim Hayes, chief investment strategist at Ned Davis Research. The current bull market, Hayes believes, is of the more normal variety. He says the monster rally doesn't signal the start of a long-term bull market. He thinks the market will take back some of the gains since the 2009 low. The gains, he argues, have occurred within an ongoing long-term bear market that began in January 2000 when overpriced tech stocks crashed.

 "It's too soon to say the secular bear market has ended," he says.

Four secular bull runs

There have been just four secular bull markets in the past 110 years. And each was a money-making machine for investors.
Length	Avg. annualized gain Dow Jones industrials
3/31/1900 to 1/19/1906	8.0%
8/24/1921 to 9/3/1929	24.9%
4/28/1942 to 2/9/1966	10.5%
8/12/1982 to 1/14/2000	16.8%
Source: Ned Davis Research

Money to be made – or lost

 Whether this is an ordinary bull market, as Hayes claims, or something far more spectacular, as Birinyi argues, could be the difference between making or losing money in stocks in both the short term and long term.

 If it's a typical cyclical bull market (there have been 34 cyclical bull markets since 1900, with average gains of 86%, NDR says), the rally is doomed to failure, and stock prices will retreat along with 401(k) balances.

If it turns out to be a new super bull market (there have been just four secular bull markets in the past 110 years, but they have lasted six to 24 years), it means the primary trend will remain up for years. The market will make new highs despite occasional sell-offs. And investors will make money with a buy-and-hold strategy.

 The Merriam-Webster dictionary defines the adjective "secular" as "relating to a long term of indefinite duration."

 There is no standard definition for a secular bull market on Wall Street. A secular bull market "lasts a long time," and propels stocks into "all-time high territory," says Sam Stovall, chief investment strategist at Standard & Poor's.

 Brian Dightman of Dightman Capital Group, offered this analogy a few years back to help clients better understand the difference between market cycles: "I would compare the seasons of a year as secular and the weather patterns within each of the seasons as cyclical," Dightman wrote. "With economies and stock markets, think of the secular time frame as 'years and decades' and the cyclical time frame as 'quarters and years.' "

 The last great secular bull market was the 18-year run that began in 1982 and ended in 2000. The Dow rallied almost 11,000 points and gained more than 1,400%. Secular bull markets can suffer scary short-term drops, or even bear markets, along the way. The bull run in the '80s and '90s, for example, was briefly interrupted by the 1987 stock market crash, the first Gulf War in 1990 and the Russian default crisis in the spring of 1989. But those drops failed to break the long-term uptrend.

 There are also secular bear markets, or long periods when the direction of the market is down. The U.S. stock market is currently in such a long-term downtrend, NDR says. There have been only three other secular bear markets, including a 16-year market drought from 1966 through 1982. Periodic rallies can occur in long-term bear markets.

 According to NDR, the current secular decline began in 2000 when the Internet stock bubble burst and vastly overpriced stocks went south. The bear dragged stock prices down again during the financial crisis in 2008. And it is still ongoing despite the rally that began two years ago, NDR believes. The average duration of a secular bear market is 16 years.

 The best example of a secular bear market is Japan's Nikkei 225 stock index. It peaked at 38,915 on New Year's Eve in 1989. It closed Wednesday at 10,579, 73% below its all-time high.

 So what are the chances that the stock market is in the early or middle stages of a really profitable secular uptrend?

•The case for a secular bull market

 This crowd is led by Birinyi, who bases his forecast on an analysis of market psychology, the flow of investment dollars and historical market patterns.

 Bull markets have four phases, he says. The first is characterized by huge gains off of market bottoms. There are few, if any, committed bulls, and most market pundits harp on all the reasons the rally can't last. That first phase this time added up to an 80% gain. In the past, big early moves like that set the stage for lengthy bull markets, he says.

 The second phase is one of price consolidation, when investors take a breather and assess whether the euphoria of the early rally is warranted. Phase three is when the bulk of investors "accept that the market is not going down." In the final stage investor exuberance becomes acute. Most investors believe the market can never go down. Everybody buys. That is normally the top.

 Right now, Birinyi says, the bull market is in phase two. He doesn't see the current uptrend ending until the middle of 2014. He forecasts gains of almost 60% from current levels.

 He says the bears' reasons for why the market will go down are "lacking in veracity." He dismisses the notion that investors are "excessively positive," which is normally a contrarian signal that often precedes market tops.

 "The market is fine," he says.

 Michael Farr, who heads money management firm Farr Miller & Washington, also thinks "the market is in the beginning of a secular bull market." He says the next phase of the bull market will be driven by investors shifting cash from bonds to stocks, which should take the stock market to a higher level. He doesn't buy doomsday scenarios of a U.S. financial collapse caused by a massive budget deficit and record levels of debt.

 Barring an exogenous shock, stocks should continue to move higher, adds Don Luskin, chief investment officer at TrendMacro. The "second leg" of the bull market is being driven by a shift to more business-friendly policies by President Obama and Congress. "The economy," he says, "is free to grow again."

•The case against a secular bull market

 Many of the characteristics normally associated with secular bull markets are still missing, says NDR's Hayes.

 In a special report, "Secular Bulls and Bears Globally," his firm notes that the typical backdrop for a secular bull market is a "relatively healthy economic environment." In general, economic growth is steady. Corporate profit growth is strong. Business spending tends to rise, while government regulation is lessening. Jobs are plentiful. Prices for commodities such as oil are under control. As a result, consumers are more confident and are willing to spend and invest more aggressively. These lengthy bullish periods are also supported by a scarcity of recessions and wars.

 While earnings have been surprisingly strong for the past year and Americans are turning more optimistic, the economy is still in a "healing process and ... correcting a lot of the conditions that got us into trouble," Hayes says.

 Consumers are still paying down debt. The budget deficit is roughly $1.5 trillion. Housing is still weak. And stock prices relative to earnings aren't as cheap as they have been at the start of other long-lasting bull markets.

 Those headwinds "won't support a secular bull market," Hayes says.

 Kevin Lane, chief investment officer at Fusion Analytics, says it's premature to expect a multiyear advance. "There are plenty of issues that will overhang the market for years," he says.

 And while the mega-bear market that began in 2000 is "closer to the end than the beginning," Hayes expects at least one more sizable market drop before the next mega-bull market is born.

 Citing history, S&P's Stovall thinks the price-to-earnings ratio of the stock market must fall to the single digits before stocks can mount another multiyear rally. Currently, the P-E based on the past four quarters is 18, he says. The S&P 500 would also need to hit a new all-time high for Stovall to begin to entertain the notion that a secular bull market was underway. A move back above the Oct. 9, 2007, high of 1565.15 would amount to a 131% gain, which is unlikely to occur without a 20% drop, Stovall says. Only four cyclical bull markets since 1900 have posted bigger gains without suffering a bear market, NDR says.

Some analysts say a multiyear bull market that will allow investors to make money with a buy-and-hold strategy is possible if a few things happen — or don't happen.

 If inflation doesn't soar out of control, and the Federal Reserve isn't forced to boost interest rates to slow the economy, the odds of a secular bull market sticking are good, says James Paulsen of Wells Capital Management.

Staying optimistic

 Definitions are irrelevant, concludes Richard Bernstein, founder of money management firm Richard Bernstein Advisors.

 "The bull market is younger than most people believe," he says. "Honestly, I don't know why you need the word 'secular.' Most people don't believe we're in a bull market, period.

 "People can't believe it, but the U.S. may be the world's most improving economy," Bernstein adds. "The U.S. is in the sweet spot of the economic cycle."

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