Anniversaries: 1 Year for Bull, 10 Years for Bear

by: Ron Rowland

There was much ado regarding the one-year anniversary of the new bull market this past week. So much, in fact, that it overshadowed the 10-year anniversary of the Nasdaq bear.

Right now, one-year performance figures are mostly meaningless. Many of the funds currently sporting the largest one-year returns were posting the worst one-year returns a year ago. With recent earnings reports, it makes more sense to compare to two years ago than just one. Likewise, when looking at returns, it is probably more constructive to look at a longer period, such as three years. And while we’re at it, let’s see how the current rally stacks up against 10-year Nasdaq bear market.

The table below shows cumulative return (not annualized). The data is from Investors FastTrack and is therefore adjusted to reflect the reinvestment of all dividends. The 3-year period begins 3/9/2007, while the start of the 10-year period is skewed one day to coincide with the Nasdaq’s closing peak on 3/10/2000. The list contains only a few representative ETFs – it is not intended to be all inclusive.

Cumulative from 3/9/2010 Ticker 3-Year 10-Year
PowerShares QQQ QQQQ +10.3% -58.0%
SPDR S&P 500 SPY -13.3% -2.8%
SPDR Energy XLE +5.8% +145.9%
SPDR Technology XLK +1.5% -59.2%
SPDR Financials XLF -53.4% -4.0%
SPDR Consumer Staples XLP +13.1% +70.4%
iShares MSCI Japan EWJ -28.1% -25.9%
iShares MSCI Australia EWA +13.0% +235.3%

QQQQ is still mired in its 10-year bear market with a -58% return the past 10 years. However, the most recent 3-year period looks better with a +10.3% gain. The QQQQ long-term chart could be viewed as 7-8 years of base building. As you might expect, the technology sector (represented by XLK) is in a similar position.

SPY shows only a small loss for the 10-year period while posting a -13.2% decline for the 3-year period. It established a new high in late 2007 and is still down more than -22% from that level.

XLE (energy) and XLP (consumer staples) represent a select group of sectors and industries with positive returns for both the 3-year and 10-year periods. However, a look at their charts reveals a significant difference. XLP is within a few percentage points of setting a new lifetime high while XLE would need nearly a +50% gain to do likewise.

The financials (represented by XLF) have lost more than half their value in the last three years, despite recent big gains. XLF is also showing a loss for the 10-year period.

The picture is mixed internationally as well. Japan (NYSEARCA:EWJ) is notorious for its “lost decade” of the 1990s. The past 10 years were yet another lost decade, and the past three years have also been unkind to Japan.

Meanwhile, resource rich countries like Australia (NYSEARCA:EWA) are similar to energy (NYSEARCA:XLE) and boast positive returns for both the 3-year and 10-year periods.

Bottom line: Yes, the new bull market is now one year old – but many sectors and countries are still in the grips of a 3-year bear market, a 10-year bear market, or both.

Disclosure covering writer, editor, and publisher: Long QQQQ and EWJ. No positions in any of the companies or ETF sponsors mentioned. No income, revenue, or other compensation (either directly or indirectly) received from, or on behalf of, any of the companies or ETF sponsors mentioned.