This article comes from the official account "Dian Investment" of Wechat, written by Zhu Ang.

In the investment, I have always thought that two big pieces are the most important:Asset allocation and betting on national fortune.

With regard to the first item, it has been estimated that 90% of the accumulation of personal wealth comes from the correct asset allocation. For example, people who have been buying houses for the past decade will have better assets than most people who have been investing in stocks. Of course, if the time is extended long enough, the rate of return of the stock market will surpass that of real estate in most markets.

So next, let's talk about the second part, investment is betting on national fortune. The most important part of the investment actually comes from sufficient risk exposure, but this risk exposure should be in the long-term upward market. This is why the stock god comes from the United States, and even most of the world's investment leaders come from the United States.It is only from a long-term upward capital market that it is possible to become a great investor.

Today I'd like to share with you a personal study of several recessions and bull markets in the United States.

Ten big bulls and bears in American history

The following picture is from the JP Morgan research report, which records ten big bulls and bears in history. The picture may not be very clear, let's sort it out one by one:

The Great Depression of 1929.This round of the Great Depression stems from two reasons: overvaluation and recession. Before the 29-year great depression, the u.s. stock market experienced a 37-month bull market, with the stock market up 152%. The bull market began in July 1926. In countless history books, we all see that the Great Depression, which began in September 1929, was the saddest day in the history of the American economy and stocks. That there are countless textbooks about the Great Depression. The bear market lasted 32 months, and the stock market fell 86%.

2. The Federal Reserve tightened in 1937.This time the bear market caused by the Fed tightening is comparable to the Great Depression of 1929, which I even think is the second decline caused by the Great Depression of 1929. The market bottomed out in March 1935, the bull market lasted 23 months, and the stock market rose 129%. In March 1937, the market began to adjust again, the stock market fell by 60%, and the bear market lasted 61 months. The bear market was triggered by a recession and premature tightening by the Federal Reserve. We can see that from 1929 to 1942, in a great recession, the bear market lasted longer than the bull market. But this will never be seen again in the future.

3. The collapse after the end of World War II in 1946.We found it interesting that at the beginning of World War II, the United States was a bull market. In April 1942, American stocks began a 49-month bull market, and the stock market rose 158%. The United States is actually one of the few countries that really benefited from World War II, with little damage to its homeland because of its location in the middle of the Pacific and Atlantic oceans. At that time, Germany, an economic power, was in ruins. In March 1946, after the end of World War II, the United States opened its third bear market in history. The bear market is also triggered by recession and excessive valuations. Very similar to the Great Depression of 1929. But the bear market fell by only 30% and lasted 36 months.

4. The flash crash of 1962.Since October 1960, U. S. stocks have started another bull market. The index rose 39% and the bull market lasted 13 months. In 1962, in the event of the Cuban missile crisis, the stock market fell 28%, and the bear market lasted only six months. President Kennedy of the United States at that time adopted a tough attitude, but in fact, the military force was already far stronger than that of the Soviet Union at that time. Of course, excessive valuations have also become a trigger for market adjustment.

5. The bear market in 1970.In fact, U. S. stocks have not performed very well for the entire 70 years. Let's start with a bull market in 1962. Although the index rose only 103%, the bull market lasted 73 months, a long-lasting boom in American history. In November 1968, the economy began to enter recession again, and the Federal Reserve kept raising interest rates and tightening liquidity. At that time, although valuations were not particularly outrageous, the market still began to bear. The entire bear market adjusted 36% for 17 months.

6. Stagflation in 1973.It was quite famous in 1973, when the so-called Beautiful 50 was greatly adjusted. First of all, we saw another bull market in May 1970, which lasted 31 months, with the index rising 74%. In January 1973, due to stagflation in the economy and high crude oil prices, the economy did not grow. The stock market began to enter a bear market. That history of stagflation has also been written in many economics textbooks. The bear market lasted 20 months, with the share price falling by 48%.

7. Volcker austerity in 1980.I once said that Greenspan, the former chairman of the Federal Reserve, grew up with the golden key. His predecessor, Volcker, was not so lucky. There was a crude oil crisis as soon as it came up. Throughout the 1980s, crude oil companies were the best companies at that time. Volcker has been cracking down on inflation and raising interest rates since November 1980. The whole bear market has gone through 20 months, and the market has adjusted by 27%. But it also laid the foundation for a 30-year boom in Reagan economics, the US stock market and the economy.

Black Monday, 1987.The bull market that began in August 1982 lasted 60 months, with the index rising by a staggering 229%. In the previous good book "the flesh of Wall Street", there is also a very detailed explanation of this period of history. While the whole market was still immersed in the joy of a bull market, Black Monday fell by more than 20% in a single day in 1987, and a large number of stocks fell by more than 50%. The whole brokerage trading room stopped answering the phone in the end. But in terms of the adjustment cycle, Black Monday in 1987 lasted only three months of bear market, with the market adjusting by 34%. In fact, this can be seen as a continuation of the adjustment of the biggest bull market from the 1980s to 2000.

The dotcom bubble collapsed in 2000.The bull market, which began in October 1990, lasted 113 months, with the index up 417 per cent. It is by far the longest bull market in American history. President Clinton, who was elected in 1992, was the first president to take office after the Cold War. As soon as he took office, he made great efforts to develop the economy and scientific and technological innovation. The entire Internet through the hardware-side chips, routers, and then to the software-side operating system, Internet social networking and search engines. It can be said that everyone thinks that the stock price is free from gravity. In March 2000, the Internet stock bubble burst, Microsoft Corp was ruled a monopoly, and AOL Snake ate up the century-old store time Warner. Then came the financial fraud of WorldCom and the collapse of MCI. The entire bear market lasted 30 months, with the index down 49%. A large number of science and Internet stocks fell by more than 90%. The trigger for this bear market is overvaluation and recession.

The most recent bear market was the financial crisis in 2008.After the market bottomed out in October 2002, u.s. stocks launched another 60-month bull market, with the index up 101%. The bull market came from the increase of leverage in the residential sector, which also led directly to the subsequent financial crisis. From the collapse of Bear Stearns to the salvation of Goldman Sachs Group in October 2007. The entire bear market lasted 17 months, with the index down more than 57%. The bear market decline was the sharpest since 1937. So it is unforgettable by everyone. There is no further explanation on the bear market. There are a large number of books on the market. If you are interested, take a look at "too big to fail" and "on the brink".

When will the next bear market begin?But the bull market, which began in March 2009, has been going on for 102 months, the second longest in U. S. history. The index rose 272%, also the second in history.

From the statistics of the top 10 bulls in the history of US stocks (the bull market is 11 times, including this time), we can see that the bear market has fallen by an average of 45%, lasting 24 months. The bull market rose an average of 158%, lasting 54 months. Is typical.The ox is long and the bear is short, the bull is strong and the bear is weak.

100-year S & P trend chart

Let's take a look at the following chart, which records the trend of US stocks from 1900 to today. The S & P index rose from less than 10:00 to more than 2000 today, a truly long-term bull market!

Judging from the 100-year trend of US stocks, it also validates the 100-year golden year of the United States.

In fact, during the 50 years from 1900 to 1950, US stocks were basically flat. It wasn't until 1954 that S & P broke through the head of the 1929 Great Depression. But the reconstruction after World War II coincided with the 20 years when the entire American manufacturing industry replaced the gold of Europe. The index rose all the way from 1950 to 1970. The whole 1970s experienced stagflation and the Vietnam War, and the index traded sideways for almost 10 years.

Buffett also founded Berkshire Investment in the 1970s, ushering in an era. In the 1980s, American consumption was driven by Volcker's crackdown on inflation and the rise of baby boomers. This 20-year bull market has changed the fate of Americans and American capital markets. Although the GDP of the United States has been the first in the world in 1980, this bull market has not only developed the globalization of American enterprises, but also made the American stock market a market in which the best companies in the world are scrambling to go public. Of course, the entry of pensions into the market contributed to the great bull market. After 2000, despite the dotcom bubble and the global financial crisis, US stocks continued to move northward with each adjustment of no more than two years.

If you think the world should continue to grow in nature, the stock market should keep hitting new highs.

Well, from the picture below, you may find that this is not the case.

The picture above shows the global index of the S & P 500 and MSCI excluding the United States. We see that the United States hit a new high after the financial crisis, but the global index excluding the United States does not. In fact, after the financial crisis, the United States has opened the economic gap with Europe and Japan.There is nothing wrong with the fact that the economy should continue to grow in nature. the problem is the speed of growth.As the world's largest economy, the United States can still maintain a relatively strong rate of growth. Both Japan, Europe, Brazil and Russia among the BRIC countries have encountered serious endogenous growth problems in the wake of the financial crisis.

The strongest Gene in Bull Market: economic growth

Finally, let's talk about the strongest gene of the bull market: economic growth.

Some people have done research, looking back at the 100-year increase in Dow Jones and the growth rate of nominal GDP in the United States is consistent. The strongest gene of a century-old bull market in US stocks is the long-term upward trend of nominal GDP. Only with the continuous economic growth, can we continue to dig out excellent enterprises and enjoy the dividends of great enterprise growth.

From this point of view, the index of A shares, which has just experienced the 6124 anniversary, is distorted in the past 10 years. In fact, the real A-shares have far exceeded the height of that year. After all, nominal GDP has maintained a growth rate of almost 8-10% in this decade. And as the economy maintains strong growth, the real bear market in A shares does not last long, basically ending in a year. This is true in 2008, 2011 and 2015.

For all our investors in A-shares, of course, the heart is to hope that we have a hundred years of national luck and maintain long-term economic growth. That's why we can only be optimistic when we invest, and the future will eventually belong to optimists.

At the end of this article, let's look at the last picture, which I call "the return of the optimist": us stocks have made a total return of 252% over the past 20 years. If you are a pessimist and hold cash or bonds for a long time, your return will be much lower than that of an optimist who holds stocks. (editor: Hu Min)