What is a Secular Market?

Malcolm Tatum

A secular market is any market setting that is moved forward due to factors or forces that have been in place for a number of years. The result of this type of ongoing influence is that investments that are traded on that market demonstrate an ongoing pattern that shows little deviation. In a secular market that is considered bullish, this means that prices tend to increase and there are more buyers operating in the market than sellers. When a secular bear market exists, sellers tend to outnumber the buyers, and prices tend to decrease over time.

Man climbing a rope
Man climbing a rope

There are a number of situations that can exert some amount of long-term influence on the direction of a secular market. One example is the outcome of political elections. The governmental policies that develop during the terms of government officials who remain in office for many years can set the stage for either stimulating a steady increase in stock prices, or result in some degree of stagnation or even reduced pricing that continues for an extended period of time. In like manner, a war that lasts for several years may create situations where one market sector posts consistent gains while other sectors languish until after the conflict is concluded.

While a secular market will exhibit a trend that is more or less constant over a longer period of time, that does not mean that some situations that run contrary to that trend may not emerge. In a bullish market, there may be short periods where some bearish activity slows the progression of the trend, but not to the point that there is a reversal in the movement of the market. In like manner, a few isolated incidents of bullish activity may have some minor effect on the general direction of a bearish market, but not enough to change that direction for any appreciable period of time.

With a secular market, the sentiments of investors tend to remain somewhat stable, as long as the underlying factors for that market sentiment remain in place. This means that if one of the primary sentiments driving investors involves the policies of a current governmental administration, and a new administration chooses to make sweeping changes, investors' sentiments may also change significantly. At that point, the market is likely to undergo shifts that move away from the trend of recent years, responding to the changed conditions. In like manner, the end of a war may cause significant shifts in the marketplace that affect the activities of investors and in turn change the relationship between the number of active buyers and sellers who participate in that market.

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