Unless your name is Sleeping Beauty and you've only just now awoken from a 100-year long siesta, you won't be shocked to hear this:
In 2008, the U.S. stock market went from gangbusters to just plain busted: The world's most watched equity index, the Dow Jones Industrial Average, plummeted 30%-plus to a five-year low, while the S&P 500 plunged 45% to an 11-year low.
All in all, it was the most severe annual loss for both indexes since the Great Depression.
It doesn't getting any worse than that -- literally. In all two-hundred-plus years of U.S. stock market history, there has never been a downturn to best the Great Depression. "Black Tuesday" of 1929 is rock bottom (at least, so far). To envision anything lower is to imagine the unimaginable.
Flash ahead to January 2009. Many of main street's biggest economic soothsayers and scholars say the bear's end is in sight. To wit: The New York Stock Exchange just reduced the minimum value of companies to $15 million from $25 million so that many firms battered by the slump can remain listed "with prospects for future recovery in their stock prices." (Bloomberg)
Also: According to a recent survey, "78% of institutional money managers believe the stock market is now undervalued." Stocks aren't cheap, says one of the polled. "Stocks are DIRT cheap." (AP)
Here's the truth: While in 2008, the U.S. stock market suffered its biggest downturn since the Great Depression, valuations didn't even come close. On this, the January Elliott Wave Theorist presents the following close-up of Year-End Stock Market Valuations since 1927.
As you can see, present stock market valuations are nowhere near the underrated levels reached in 1932, at the end of the Great Depression. Not only that, they still stand well above the "Normal Range" of valuation seen during the bulk of the market's existence.
Make no mistake: No matter how powerful and persistent the bear market rallies are from this point forward, this is still very much a bear market.