• From the market cycles chart to the left we see that the S&P500 typically alternates between long multi-decade bull cycles and multi-decade bear cycles.
  

• As discussed on the valuation analysis page (see valuation analysis), these bull and bear cycles are primarily driven by PE expansion and contraction because earnings growth has been relatively smooth compared to the volatile swings in the S&P500.
  

• As an investor it is important to recognize where we are in the market cycle and position portfolio risk accordingly. 
  

• Our research analysis suggests that during major bearish stock cycles, investments in bonds typically do well in the first half of the bear cycle when governments are cutting interest rates in response to the declining stock market/economic situation.
  

• During the second half of the bear phase, hard assets like gold, real estate, and commodities typically outperform due to inflation caused by government stimulus, deficits, and currency debasement.   Stocks perform poorly until the very end of the bear phase at which point the long term PE ratio is reset to a lower more reasonable level.   The chart of gold vs stocks to the left shows how gold moves in a counter cycle with stocks.
  

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