Sideways Markets
Firm Profile > Sideways Markets
Markets Move Sideways After a Major Mania
History shows that after a major mania, the overall market capitulates, consolidates and moves sideways for lengthy periods of time (as long as 15 – 30 years). These sideways markets are characterized by range-bound stock prices and periods of tremendous volatility. We believe markets are showing many characteristics of sideways markets (brought on, in this case, by the crash of the tech bubble in 2000).
Characteristics of Sideways Markets
- Passive Investing is Ineffective
Active stock picking is required to potentially achieve significant return. - Significant Volatility
Markets can reach record highs under these conditions. However, these high points are often followed by frequent and volatile downward swings. - End when Overall Market P/E Multiple is Reduced
A single-digit P/E multiple for the overall market is a good sign that the excess has been flushed from the system and the foundation is set for a new bull market.