Unexpected Returns: Understanding Secular Stock Market Cycles



Why is the stock market acting differently in the 2000s than in the 1980s and 1990s?

Before you read any how-to investment book or seek financial advice, read Unexpected Returns, the essential resource for investors and investment professionals who want to understand how and why the financial markets are not the same now as they were in the 1980s and 1990s. In addition to explaining the fundamentals, this book takes you on a graphic journey through the seasons of the market, tying together economics and ...

See more details below
Other sellers (Hardcover)
  • All (29) from $1.99   
  • New (5) from $24.98   
  • Used (24) from $1.99   
Sending request ...



Why is the stock market acting differently in the 2000s than in the 1980s and 1990s?

Before you read any how-to investment book or seek financial advice, read Unexpected Returns, the essential resource for investors and investment professionals who want to understand how and why the financial markets are not the same now as they were in the 1980s and 1990s. In addition to explaining the fundamentals, this book takes you on a graphic journey through the seasons of the market, tying together economics and finance to show why the stock market does what it does. Using comprehensive full-color charts and graphs, it offers an in-depth exploration of what has changed over the past five years - and what you can do about it to avoid disappointment with your investments. This unique combination of investment science and investment art will enable you to differentiate between irrational hope and a rational view of the current financial markets. Based on years of meticulous research, it provides the sensible conclusions that will drive your future investment choices and give you the confidence to rely on your investment outlook, whatever your financial strategy.

All rights reserved. This book may not be reproduced in whole or in part, by any means, electronic or mechanical, without prior written permission from the publisher.

Copyright by Ed Easterling
Read More Show Less

What People Are Saying

Bill Mann
"The stock market is one of the few places on earth where people become more excited to buy when things are expensive, and more anxious to sell when things are cheap. Ed Easterling has penned a masterful accounting about why this is so wealth-destructive, presented without preconceived notion or bias."
Senior Editor, Investing, The Motley Fool
Harvey Rosenblum
"Unexpected Returns provides a broad, deep, and provocative exploration of the factors that determine stock market investment returns over a person's lifetime. Of special interest to me, as a Federal Reserve policy advisor on monetary policy, is Easterling's exploration of the critical role of low and stable inflation as a key determinant of stock market performance."
Senior Vice President and Director of Research, Federal Reserve Bank of Dallas
John F. Mauldin
"Ed Easterling has given the world of investing the single best, easy-to-read, study of stock market cycles of which I know. He lays out a path for you to find your own Unexpected Returns, showing you how to confidently navigate the waters of market volatility. Serious investors will devour this book and profit. It should be required reading for investment professionals."
President, Millennium Wave Investments, author of Bull's Eye Investing
Richard Sylla
"Unexpected Returns is at once a penetrating analysis of more than a century of stock market experience and a realistic guide to how we may expect the markets to perform in the years ahead. Easterling's findings and conclusions are grounded on the best economic and financial thinking of our time. This is a book for the serious investor and student of the markets."
Henry Kaufman Professor of the History of Financial Institutions and Markets, Stern School of Business, New York University, co-author of A History of Interest Rates
Rob Arnott
"People are accustomed to the vagaries of market cycles. Far too few realize that these are subsumed within secular bull and bear markets, spanning decades not years. Ed Easterling has done a fine job of describing how these long cycles work and how the investor can plan investment strategies accordingly."
Chairman, Research Affiliates, LLC; Editor, Financial Analysts Journal
Read More Show Less

Product Details

  • ISBN-13: 9781879384620
  • Publisher: Cypress House
  • Publication date: 3/28/2005
  • Pages: 296
  • Sales rank: 978,433
  • Product dimensions: 6.38 (w) x 9.20 (h) x 0.99 (d)

Table of Contents



Chapter 1: Planning the Journey

The Right Frame of Mind
Ten Key Concepts

Chapter 2: The Principles

Final Preparation


Chapter 3: Stock Market History

The Stock Market Matrix: Taking the Red Pill
About Returns and Assumptions, and Making Them Relevant
Generational Returns -Twenty-year Returns
Significant Swings
Why Volatility Matters
Stock Market Yo-Yo
Must Be Present to Win?

Chapter 4: Interest Rates and the Inflation Roller Coaster

Overview of Interest Rates
Overview of Inflation
Interest Rates and Inflation
Dynamic History
The 6/50 Rule
Key Concepts for this Section: Market History


Chapter 5: Secular Cycles

Secular Market Profile
Stock Market Profile Across Secular Periods
Inflation, Deflation, and Market Seasons
Dispelling the Myth: It's Actually Not the Economy
The Y-Curve Effect
Valuation Matters

Chapter 6: The Current Cycle

Current Market Cycle
The Dividend Insight
Looking Ahead
Key Concepts for This Section: Secular Cycles


Chapter 7: Financial Physics

Predicting the Future of the Stock Market
Building the Financial Physics Model
Financial Physics: A Tool for Valuing and Predicting the Market

Chapter 8: Implications from Financial Physics

The Voyage So Far
Looking Forward in the Market and in the Book
Valuation Cascade: A Natural Upper Limit for P/Es
Dissecting Returns: Forecasting Stock Market Returns
Limited Returns and Market Vulnerability Going Forward
Key Concepts for this Section: Financial Physics


Chapter 9: Investment Philosophy

Absolute Return and Relative Return Investing
Risk Can Be a Friend or a Foe
Return Profiles
A Little History: The Devil's in the Assumptions

Chapter 10: Row, Not Sail

Sailing and Rowing
Drowning in Averages
Key Concepts for this Section: Investment Philosophy


Chapter 11: Investment Techniques for Traditional Investors

Effective Bond Portfolios
Rebalancing Stock Market Portfolios

Chapter 12: Investment Management Evolution

A Brief History
Hedge Fund Investing
Vision of Future Investment Management
Closing the Loop
Ten Key Concepts


Chapter 1: Planning the Journey
Chapter 2: The Principles
Chapter 3: Stock Market History
3.1 Stock Market Matrix
3.2. DJIA: 1965 to 1981 & 1982 to 1999
3.3 Generational Returns: Twenty-year Periods
3.4. Stock Market Returns Based Upon Starting P/E Ratio (1900-2003)
3.5. Twenty-year Rolling Stock Market Return & Change in P/E Ratio
3.6 Significant Swings (Dispersion of Annual Stock Market Changes)
3.7. Volatility Gremlins (DJIA: 1900-2003)
3.8 Impact of Volatility and Negative Numbers
3.9. Volatility and Market Returns
3.10. Almost 50/50: Positive and Negative Days in the Market
3.11 Profile of Best and Worst Days

Chapter 4: Interest Rates and the Inflation Roller Coaster
4.1. Bond Yields and Inflation (20-year T-Bond vs. CPI)
4.2. 50 Basis Point (0.5%) Boundary
4.3. Interest Rate Changes within the Subsequent Six Months
4.4. Interest Rate Changes in Percentages

Chapter 5: Secular Cycles
5.1. Secular Bull and Bear Markets Profile
5.2. Stock Market Dispersion during Secular Cycles
5.3 Stock Market and Economic Growth
5.4. P/E Ratio and Inflation
5.5. Impact of Starting P/Es)

Chapter 6: The Current Cycle
6.1. S&P 500 P/E Ratio Since 1900
6.2. S&P 500 Dividend Yield Since 1900
6.3. S&P 500 Inflation: CPI Since 1900
6.4. Interest Rates: 20-year Treasury Bond Yield Since 1900
6.5 Dividend Yield and P/Es
6.6. Valuation Matters: 1982-1999
6.7. Valuation Matters: Low Inflation
6.8. Valuation Matters: Average Inflation

Chapter 7: Financial Physics
7.1. Financial Physics Model
7.2. Economic Growth: Constant over Time
7.3. Earnings per Share Related to Economic Growth
7.4. Earnings per Share Is Highly Predictable over Time
7.5. EPS Predicted from 1975
7.6. Relationship of P/E Ratios and Interest Rates: 1900-2003
7.7. Relationship of P/E Ratios and Inflation: 1900-2003
7.8. Earnings per Share Related to Economic Growth
7.9. EPS Predictable over Time
7.10. Relationship of P/E Ratios and Inflation

Chapter 8: Implications from Financial Physics
8.1. Dividend Discount Model
8.2. Spread between 20-year T-Bonds & 1-year T-Bills
8.3. Valuation Cascade: Impact of Inflation on P/E Ratios
8.4. S&P 500: Dividend Yield vs. P/E
8.5. Financial Physics Model
8.6. Components of Total Return
8.7. Market Price Change Components
8.8. Six-Year Annualized Returns Since 1900
8.9. Six-Year Annualized Return Components
8.10. Future Stock Market Return Scenarios

Chapter 9: Investment Philosophy
9.1. Relative Return Profile
9.2. Absolute Return Profile

Chapter 10: Row, Not Sail
10.1. Secular Bull Market Chart
10.2. Secular Bear Market Chart
10.3. Historical Price/Earnings Ratio
10.4. Dividend Yield vs. P/E Ratio
10.5. Inflation and P/E Ratios

Chapter 11: Investment Techniques for Traditional Investors
11.1. Yield Curve Example
11.2. Breakeven Yield Curve
11.3. Bond Ladder Returns
11.4. Rebalancing in Secular Bull Markets
11.5. Rebalancing in Secular Bear Markets

Chapter 12: Investment Management Evolution
12.1. Hedge Fund Structure: Artistry of Design
12.2. Hedge Funds: Common Elements
12.3. Portfolio of Hedge Funds

Read More Show Less

Customer Reviews

Be the first to write a review
( 0 )
Rating Distribution

5 Star


4 Star


3 Star


2 Star


1 Star


Your Rating:

Your Name: Create a Pen Name or

Barnes & Noble.com Review Rules

Our reader reviews allow you to share your comments on titles you liked, or didn't, with others. By submitting an online review, you are representing to Barnes & Noble.com that all information contained in your review is original and accurate in all respects, and that the submission of such content by you and the posting of such content by Barnes & Noble.com does not and will not violate the rights of any third party. Please follow the rules below to help ensure that your review can be posted.

Reviews by Our Customers Under the Age of 13

We highly value and respect everyone's opinion concerning the titles we offer. However, we cannot allow persons under the age of 13 to have accounts at BN.com or to post customer reviews. Please see our Terms of Use for more details.

What to exclude from your review:

Please do not write about reviews, commentary, or information posted on the product page. If you see any errors in the information on the product page, please send us an email.

Reviews should not contain any of the following:

  • - HTML tags, profanity, obscenities, vulgarities, or comments that defame anyone
  • - Time-sensitive information such as tour dates, signings, lectures, etc.
  • - Single-word reviews. Other people will read your review to discover why you liked or didn't like the title. Be descriptive.
  • - Comments focusing on the author or that may ruin the ending for others
  • - Phone numbers, addresses, URLs
  • - Pricing and availability information or alternative ordering information
  • - Advertisements or commercial solicitation


  • - By submitting a review, you grant to Barnes & Noble.com and its sublicensees the royalty-free, perpetual, irrevocable right and license to use the review in accordance with the Barnes & Noble.com Terms of Use.
  • - Barnes & Noble.com reserves the right not to post any review -- particularly those that do not follow the terms and conditions of these Rules. Barnes & Noble.com also reserves the right to remove any review at any time without notice.
  • - See Terms of Use for other conditions and disclaimers.
Search for Products You'd Like to Recommend

Recommend other products that relate to your review. Just search for them below and share!

Create a Pen Name

Your Pen Name is your unique identity on BN.com. It will appear on the reviews you write and other website activities. Your Pen Name cannot be edited, changed or deleted once submitted.

Your Pen Name can be any combination of alphanumeric characters (plus - and _), and must be at least two characters long.

Continue Anonymously
Sort by: Showing all of 5 Customer Reviews
  • Anonymous

    Posted August 22, 2013

    This book is a real eye opener.  Don't let the publication date

    This book is a real eye opener.  Don't let the publication date fool you.  The analysis presented here and on Ed's website is phenomenal and accurate, a combination seen very rarely.  Well don!

    Was this review helpful? Yes  No   Report this review
  • Anonymous

    Posted February 10, 2006

    One of the Best Investment Books I've Ever Read

    This is NOT a 'how to' book about trading stocks. Rather, the author explains why stocks and bonds respond to rising or declining inflation, its impact on GDP and corporate earnings and ultimately its impact on P/E ratios. Each chapter is like a step ladder that leads to better understanding of investment valuations. With this information, one can assess why the market is highly valued or under valued at any point in time and then use it as a foundation to employ specific investment strategies. Ed doesn't get very specific here, but that's OK. Again, the book's real benefit is its description of the 'big picture'and arms the reader with timeless information. 'Show a man how to fish and you feed him for a day. Teach a man how to fish and you feed him for a lifetime.' This book will teach you!

    Was this review helpful? Yes  No   Report this review
  • Anonymous

    Posted April 19, 2005

    Understanding Market Cycles and What to Do About Them

    The stock market¿s phenomenal rise from 1982-1999 and equally impressive fall beginning in 2000 naturally led many to question the buy-and-hold, ¿stocks for the long run¿ conventional investing wisdom of the 1990¿s. Among the questions: do secular bull and bear markets really exist, and how long do they last? Can we know what causes them? Are they predictable? Can we know which market phase we are experiencing now? If so, what practical benefit does that provide us in forming an investment strategy and making investment decisions? These are all timely and important questions, and a new book, Unexpected Returns by Ed Easterling, is the most elegantly structured treatment of the subject that I¿ve seen to date, presented with clear historical data to back up the arguments. The surprising thing is how much the average investor experience depends upon stock prices relative to earnings or dividends, and whether these multiples expand or contract during a given investment period. There is a wonderful chart on page 80 of Unexpected Returns that shows just how much investors are dependent upon changes in P/E ratios, not earnings growth, over time for their returns. Easterling shows clearly that the best environment for P/E ratios is when inflation is low and stable and approaches price stability. The further conditions stray from this low-inflation, price stability environment, the greater the downward pressure on P/E ratios. Historically, the highest levels of inflation (such as those experienced in the 1970¿s) and the most extreme examples of deflation (such as that in the early part of the 20th century in the U.S.) correspond with historically low P/E ratios. One of the strongest points emphasized by the book is that interest rates and inflation have never been stable for long, and the recent condition of low inflation price stability is a historical anomaly. As long as the current benevolent inflation / interest rate environment lasts, stocks can support P/E ratios in the low 20¿s; the sooner it changes, and the more drastically, the farther P/E ratios will have to fall. The evidence, as Easterling lays it out, makes it far more likely that the stock market¿s nice performances in 2003 and 2004 represent nothing more than a typical bear market rally than the beginning of a new bull market. Stock prices and interest rates similar to those prevailing today have historically marked the ends of bull markets, not their beginnings. The recognition of the conditions of a secular bear market requires a different investment strategy than does a bull market ¿ as Easterling would say, row, don¿t sail. Unexpected Returns is compact, highly readable, and offers compelling historical evidence for the inevitability of secular bull and bear markets, what drives them, and the clear signals that can be used by enlightened investors to determine the prevailing market cycle in order to improve results in bull and bear markets.

    Was this review helpful? Yes  No   Report this review
  • Anonymous

    Posted April 16, 2005

    Must Read for Investors!

    Ed Easterling has written a truly special book. Unexpected Returns framed the market history, current situation, and likely future in a straightforward manner that draws insightful conclusions about investing. I highly recommend reading this book!

    Was this review helpful? Yes  No   Report this review
  • Anonymous

    Posted March 31, 2005

    A remarkable book about the history of the markets bull and bear cycles

    As an investment advisor employing both fundamental and technical analysis, the 'Secular Bear Market' seems to me an obvious theme. Major stock market indexes are currently as low as they were in 1998. Six years of a secular bear market and most investors are still using the same strategies that worked in the rising markets of the `90¿s (buy and hope). This trend is nothing new; stocks have cycled 8 times from upward to sideways, over and over, about every two decades since the 1901. Traditional ¿buy and hold¿ relative return strategies rely on the direction of the markets. They enjoy gains when they occur, suffer loses when the market declines, and require a long time horizon that many investors don¿t have. Skill-based tactical strategies seek gains regardless of market direction using investment manager skill in sector rotation, hedging strategies, and risk management. As Ed says in the book, when the wind is blowing we can let out the sails and enjoy the ride. When the wind stops blowing, you can sit there and wait the wind to come again, or you can get out the ores and start rowing. Based on current technical and fundamental research, it seems the wind may not cast our sails and the ores are now necessary to get where we want to go. This book is truly a remarkable account of the markets history. Very well written and compelling research that all investors must understand. Mike Shell

    Was this review helpful? Yes  No   Report this review
Sort by: Showing all of 5 Customer Reviews

If you find inappropriate content, please report it to Barnes & Noble
Why is this product inappropriate?
Comments (optional)