Da Bear, Da Bulls - Vincent Delisle's Strategic Edge Weekly

I thought I'd share some of Vincent Delisle's thoughts from this weeks Strategic Edge which is hot off the press. The objective of this week's report is to highlight commonalities between other long-term cycles in the context of positioning the current US equity bear market. Since 1871, there have been five other secular US equity bear markets and five secular bull cylces. Currently, the S&P500's ten-year annualized performance (price only) is a negative 3.6% versus a positive 4.5% historical average,and a positive16.8% back in August 2000.

Extreme deviations in both P/E levels and annualized returns typically earmark imminent US equity secular changes. Vincent and his team currently see extreme deviation in annualized returns, but not in terms of valuations. The current bear market which started in August 2000 with an S&P500 trailing P/E at 29 times and ten-year compound annual growth rate of 16.8%, appears to be in the latter stages; however, bear market conditionscould still prevail in the near term. Vincent and his team expect the volatile trading environment to linger through 2011, favouring tactical trading strategies. onger term, however, the US equity risk/reward outlook is the most appealing in decades

GB