David Rosenberg: We're calling bull on the 'new bull market'

financialpost.com:

The rally in equities since the October lows has been hailed by many commentators as the start of a new bull market, but even a 20-plus per cent move can be a normal feature of a protracted bear market. This is nothing we have not seen before, having experienced 20-plus per cent rebounds in the 2000/02 and 2007/09 bear markets. Every bear market in the past, as an aside, had a reflexive rally off the oversold lows that followed the first leg down. So please, let’s not hyperventilate.

Since we are not “new era” advocates and believe that cyclical patterns tend to re-emerge over time, we take the view that we just experienced phase two of an extended bear market, rather than the beginning of a bull run. Phase three, which involves the long and drawn-out decline to the fundamental lows, still lies ahead of us.

Take note as to what helps define the end of a fundamental bear market: recession bear markets end 70 per cent of the way into the economic downturn and also 70 per cent of the way into the United States Federal Reserve easing cycle; only when the yield curve (2s/10s) pivots to a positive slope (140 basis points on average) do we see the alarm bell ring that the lows are at hand; and the equity risk premium (ERP) at sub-100 basis points is daunting math as market lows are only reached typically when that stock-bond relative yield differential reaches 400 basis points.

This year’s rally was purely driven by factors that tend to be brief in nature and non-fundamental, as in technicals, sentiment (animal spirits) and short covering. At true lows in the bear market cycle, we tend to see breadth improve much more forcefully than has been the case so far; we tend to see financials and the cyclical sectors outperform, and