According to my analyses a secular bear market for the S&P 500 began on 2/18/2025, the date which the S&P 500 reached its all-time high. The date also coincides with the ending of the 16 years 2009 to 2025 secular bull market. The S&P 500 was the last of the major U.S. indices to enter a secular bear market. This report contains the four reasons for why it’s possible for the 2025 secular bear to cause declines of 80% or more for the Dow and S&P 500.
Note. A 3:53 seconds video explaining my research methodology that enabled my media verifiable major correction and crash predictions along with a table containing the accurate predictions is near the bottom of this report. For the record, I consider this 3/17/25 report to be my best ever. That says a lot. My prior best ever was the September 2007 magazine article wherein I predicted the collapses of the five brokers including Lehman, Merrill Lynch and Bear Stearns. The quote below is an excerpt from the print version of my article.
Based on the in-depth rationale that is provided herein my recommendation is for a defensive growth strategy to be deployed. A table which covers the allocations for a defensive growth strategy is at the bottom of this report. The strategy which applies in both volatile and non volatile stock market conditions enables $100,000 to increase to approximately $1,700,000 within 10 years. The table below contains the dates for which the two indices and also NASDAQ entered into their secular bear markets.
Based on prior secular bears dating back to 1929 the S&P 500 and Dow will steadily decline and for a minimum of eight years. When the bottom is reached the indices will have declined by 47% to 89%. My projected month for the bottom to be reached is July 2026.
A commonality shared historically by all secular bears is for them to wreak havoc and extreme volatility including routine double digit declines followed by gains in their early stages. The fear they invoke and the inability for the index to quickly get back to the former high reigns in the dip buying behavior which is prevalent during a secular bull. The result is the market or index becomes vulnerable to a series of lower highs and lower lows as it heads toward the bottom and maximum percentage decline from the high. Therefore, the 85% or even a 50% decline does not happen via a market crash. The chart below depicts the road map for Dow’s the 89% decline from 1929 to 1932. The initial crash was followed by a series of lower highs followed by lower lows until index bottomed in June of 1932. A similar decline of 50% or more now will exhibit similar behavior as then. Historically, markets have always taken stairs and not elevators down.
The chart below depicts the performance of the Dow Jones 30 Industrials index from 1920 to 2025. For the period the index increased by 2,193%. During the 105 years there were an equal number of extended up and down periods. The nomenclature for an extended up or down period of eight or more years is “secular”.
The table below contains the percentage increases and declines for each of the Dow’s up and down secular periods. The historical pattern of the secular markets is huge gains which are then followed by 49% to 89% of the gains being wiped out.
Secular markets should not be confused with cyclical markets. The chart below depicts the cyclical bears that occurred during the 1949- 1966 secular bull.
Chart below depicts cyclical bulls that occurred during the 1966-1982 secular bear.
The 2009 Secular Bull’s 628% gain and duration of 16 years are comparable to prior secular bulls. Thus, the probability is very high that the secular bull for the Dow and the other indices ended at their recent all-time highs. However, its possible, but not likely, that an old bull could catch a second wind and live an extra year or two.
The majority of, if not all, blue chip stocks decline during secular bears. Its due to an increase in forced liquidations by mutual funds to enable their holders to redeem their shares. The chart below depicts the share price of Cisco Systems. Cisco, which provided the routers for everyone to gain access to the Internet, was valued for $500 Billion and was the most valuable company in the world at its all-time high in 2000. A Cisco share did not get back to the 2000 high price until 2021.
The video below covers the weak performance for numerous blue chips during several secular bear markets.
Exit Blue Chips During Secular Bears
The ideal for the Trump administration would be for the stock market to experience a decline that is on par with the 2008 crash. Its because investors and asset managers have historically sold stocks to buy bonds when a market becomes highly volatile. The chart below depicts the yield for the 30 Year U.S. Treasury bond declining by 47.6% in late 2008 to 2.5% from the 2008 high of 4.8%.
The rationale for a significant decline and volatility for the stock market is because the interest that is paid to U.S. Treasury bond holders is the largest expense for the U.S. Fiscal budget. The table below contains the top five expenses for the U.S. government. Upon a crash of the markets the interest expense for the U.S. government could potentially decline to 6.5% from 13.0%. Therefore, a market crash is the easiest way to quickly and easily reduce the deficit.
The probability for the Trump administration allowing a crash or severe decline to occur is high for two reasons:
- Trump can not run for re-election.
- Findings from my research of Treasury Secretary Scott Bessent
It can be argued that the Secretary of the U.S. Treasury is a President’s most important member of the Presidential cabinet. Its because the Treasury Secretary has the latitude to determine whether long term (up to 30–year maturity) or short-term (as short as 2-year maturity) bonds are utilized to finance a government deficit. Mr. Trump’s pick for the Treasury was a billionaire hedge manager, Scott Bessent. The new Secretary of the U.S. Treasury and also his former boss Stanley Druckenmiller are on the record for criticizing Janet Yellen who was Mr. Biden’s Secretary of the U.S. Treasury. The criticism was due to her not issuing 30–year Treasury bonds during 2021, the first year of the Biden Administration. The proceeds from the bond issuances could have been utilized to refinance the U.S. government at a significantly lower interest rate. The refinancing is similar to those who refinanced their mortgages when the rates were at multi-decade lows during 2021. The chart of the 30–year bond interest rates for 2021 and 2024 below depicts the huge mistake.
Secretary Bessent will not make the same mistake as Yellen because he fully understands the markets. Prior to his accepting the Secretary of the Treasury position he was managing his $1.0 billion hedge fund. Mr. Bessent’s Wall Street roots are deep. Early in his career he worked for the following famous short sellers:
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- Stanley Druckenmiller
- George Soros
- Jim Chanos
Most significantly, Mr. Bessent assisted Mr. Soros in his famous shorting of the British Pound. For more on Bessent read “Scott Bessent’s rise through finance to the US Treasury”, Reuters 11/23/24.
Please note. Based on IRC Section 1043, a policy related to the cabinet members of a U.S. President, Mr. Bessent’s entire net worth is invested in U.S. Treasury bonds. Thus, Bessent has a protected conflict of interest for value of a U.S. Treasury bond to appreciate. Since the easiest and fastest method for the bonds to appreciate would be a stock market crash Mr. Bessent is in effect short the stock market and long the bond market. It would not surprise me if Mr. Bessent resigns his position as Treasury Secretary after a stock market crash. The crash would provide the stone for Bessent to kill the following birds:
Most significantly, DOGE is scheduled to expire on 07/04/2026. My hunch is that the date was picked to provide the Republican party with a narrative that would enable the party to maintain control after the 2026 mid-term elections:
For the flight out of stocks and into bonds to occur will require that the S&P 500, Dow and NASDAQ all decline by a minimum of 30% from their all-time highs. Assuming a complete reading of this entire report, any and every reader would agree that, the probability for such a decline is very high.
The question is how much will the indices including the Dow decline beyond 30%? Any one of the four reasons below could potentially be cause for Dow Jones to exceed its 1929 to 1932 record decline of 89%. The video ““How S&P 500 Can Decline by 80%+?” explains the four reasons.
1. Dodd Frank. The 2010 Dodd Frank Act forever changed structure of the capital markets. The act resulted in
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- Cash being forced out of smallest publicly traded companies and into the largest publicly traded companies. The chart below depicts the S&P 500, Russell 2000 and the Royce Small Cap Trust from July 2010 to present. The S&P 500’s returns were twice the Russell 2000 (RUT) and 10 times the Royce Small Cap Trust (RVT). The majority of the S&P 500’s gain have been powered by the Magnificent 7. It’s because the seven largest companies or monopolies in the world have been providing growth and safety.
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- The dearth of small publicly traded growth opportunities and the excessive over-valuation for the S&P 500 has resulted in a surfacing of demand for privately held growth companies or private equity investment opportunities. At the beginning of 2025 the demand began to increase significantly. See 01/30/25 “Can Private Markets Be the Alternative to Lofty Public Market Valuations?” and “2025′, Year for Transformation to Private from Public Market Began“, 02/18/25.
Bain has projected that amount of private or non-publicly traded assets managed by investment managers will reach $65 Trillion by 2032. To put this into perspective the market value of the S&P 500 at 2/28/25 was $48.7 Trillion. See “Asset Managers Must Invest in Private Markets Now, Bain Says”, 08/21/24.
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- The motivation for investment managers to liquidate their publicly traded holdings to purchase investments in private companies and alternative investments is a substantially higher asset management fee for managing non publicly traded or private assets. BlackRock, the world’s largest asset manager with $13 Trillion of assets under management is leading the transformation from public to private. For about BlackRock’s fee income having the potential to multiply by 10 or more times for the assets it now has under management see “Fund Giant BlackRock Is Out to Unite Public and Private Markets” 02/20/25. BlackRock CEO, Larry Fink advocated a new 50% stocks, 30% bonds and 20% private assets portfolio allocation strategy in his latest annual investor letter. View video “Greed Driving BlackRock to Liquidate Magnificent 7 Holdings” below.
Greed Driving BlackRock to Liquidate Magnificent 7 Holdings
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- The extinction of the stockbroker since under Dodd Frank they became criminally liable. This resulted in almost all investment managers for individual investors becoming fee, or percentage of assets managed, instead of commission based. This is a big problem because an asset manager does not receive a fee if they move their clients into cash. Thus, the inherent conflict of interest ensures that clients will not have any cash to purchase shares at a market bottom. Since the majority of investors will not have cash to buy it will be very difficult for the indices to find bottoms.
The Dodd Frank Act created a worldwide society which now believes that the S&P 500 is bullet proof. Retirement plans and savings invest in the index because it is considered to be a guaranty for steady portfolio growth. The relentless and relative outperformance by the Magnificent 7 vs. the 493 smaller members of the S&P 500 has removed the word “risk” from an investor’s vocabulary. The new logic that bigger is always better for growth defies the math. That behemoth companies justify much larger earnings and revenue multiples than tiny companies is counterintuitive. Dodd Frank has resulted in the capital markets becoming bifurcated into two separate private and public markets. By 2030 companies with valuations of:
- Less than $1.0 billion will be financed and shareholders will have liquidity via the private market. Those companies that are not profitable at $1.0 billion valuations will cease to exist or will be acquired.
- $1.0 billion or more will have access to the public market. Public companies with market valuations of less than $1.0 billion will eventually become extinct
2. US Fiscal Budget. Trump Administration and DOGE has goal to reduce or eliminate US Fiscal budget deficit. A deficit reduction of or a surplus for the US fiscal budget is very negative for the US stock market. It because Fiscal Deficits increase the revenue and earnings for businesses and most especially large publicly traded companies. The S&P 500 has a history of becoming more volatile and declining during those periods in which the U.S. has had a Fiscal surplus. The chart below depicts US government surpluses since 1950.
The chart below depicts the performance of the S&P 500 when the U.S. had two consecutive years of a fiscal surplus.
The chart below depicts the performance of the S&P 500 when the U.S. had four consecutive years of a fiscal surplus.
3. US Trade deficit/surplus.Trump Administration has goal to reduce or eliminate US Trade deficit. The reduction of or a surplus for the U.S. Trade deficit is also very bearish or negative for U.S. stocks. Trade deficits increase the demand by foreign investors for US stocks. It’s because a trade deficit for a country becomes a surplus for the counter party country and its businesses who are the recipients of the surpluses. The surplus of dollars received by businesses are then reinvested back into the U.S. via the stock market. The chart below depicts the trade deficits and the S&P 500 from 2007 to present.
4. High proportion of elderly investors. 79% of all stocks and mutual funds in the US are held by individuals at age 55 and above. 38% are held by individuals at age 70 or older. There is a high probability because of DOGE that these investors could get nervous and sell. This would especially be the case should any news about reducing or eliminating social security surface. Also, unless interest rates come down hard and fast, there is the risk that the elders will sell their stocks anyway to buy government bonds. Its for any or all of the reasons below:
- Increasing their income
- Bad news about economy, DOGE and tariff caused inflation
- News about potential changes to social security benefits
- Preserving estates from heightened stock market volatility
Therefore, the probability is very high for elders to be sellers instead of being buyers when the Dow and S&P 500 indices are attempting to form a bottom.
My recommendation is for all blue-chips and mutual funds to be sold. The proceeds can be utilized to deploy a defensive growth strategy. The strategy enables a portfolio to grow during a secular bear or bull market. The table below depicts that $100,000 deployed into the strategy is projected to increase to $1,742,000 by 2034.
The defensive allocation for the strategy is to invest half of the proceeds into bonds which are guaranteed by the U.S. government. A quarter of the allocation is to hedge funds. The primary growth component is the 15% startup and 10% emerging growth company allocations that enable the participation in new technologies and products that can save or change the world. For example, investors in 1928 could have utilized television broadcasting company investments for the growth allocations. This would have enabled them protect and to grow their assets from 1929 to 1955. The period encompassed the 1929 Crash and Great Depression.
The chart and table below depict change the world companies, Disney, CBS and NBC. They were founded from 1923 – 1927 to produce news and entertainment programming for the television. The TV, which had been under development since 1920, became commercially available in 1929 changed the world. A Philadelphia business man paid $500,000 to acquire CBS in 1927. The network eventually became a publicly traded company and was acquired by Viacom in 1999 for $40 billion.
The table below on the right contains four of the companies that are recommended for the growth allocation portion of defensive growth strategy deployment. A $10,000 investment in each of the four early-stage private companies is projected to be valued for between $2.33 and $7.69 million by 2028. The companies were identified due to their sharing the common denominators with the companies in the left table. $10,000 in each from 2008 to 2012 increased to between $16 and $200 million by 2017. My research methodology for 48 years has been to research extreme events and to then utilize the findings to develop an algorithm which can be used to predict the next similar event. A view of my 3:53 seconds video explaining my research methodology is highly recommended.
Defensive Growth Strategy Explained
There are four videos that are recommended for viewing. The first two cover and provide simple explanations for all of the content in this report. The third covers an early stage company that is a member of the Defensive Growth strategy portfolio.
- Clip (1:03 minutes) from Kevin Muir’s Wealthion interview (1:54 minutes): “US Stocks to Underperform For Years”. In the interview Kevin provides the road map, which includes some of the findings utilized for this report, for the nine to 13 years secular bear which is now underway.
- Recording of 3/8/25 Markowski on the Markets ZOOM session: “Secular Bear Underway, what is Powering it & Defensive Growth Strategy”
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RYPPLZZ, the next Microsoft is Centerpiece for Defensive Growth Portfolio
The fourth and last video below covers my process or methodology that has been utilized to make bold and accurate predictions including those in the table below the video.
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─ Companies listed on SaveChangeWorld.com that qualify for inclusion in a defensive growth portfolio
- Publicly traded micro-caps with 10X upside potential
- Private startup and early stage with 100X upside potential
Michael Markowski, Director of Research for SaveChangeWorld.com. Developer of “Defensive Growth Strategy”. Entered markets with Merrill Lynch in 1977. Named “Top 50 Investor” by Fortune Magazine. Formerly, underwriter of venture stage IPOs, including one acquired by United Health Care for 1700% gain. Since 2002 has conducted empirical research to develop algorithms which predict the negative and positive extremes for the market and stocks. Has verifiable track records for predicting (1) bankruptcies of blue chips, (2) market crashes and (3) stocks multiplying by 10X. In a 2007 Equities Magazine article predicted the epic collapses for Lehman, Bear Stearns and Merrill Lynch. Most recent algorithm developed from research of UBER and AirBnB has enabled identification of startups having 100X upside potential within 7 to 10 years.