Average returns from 1985 to 2012 or over 27 years is about 26% based on the annual nominal local currency. The first cycle (1985-1996) generated 50% nominal returns yearly. This cycle (2003-2012) has yielded only 23.61%, still distant from the 27 year average or from the post martial law first cycle.
This is NOT to suggest that the Phisix will need to repeat the returns of the first cycle boom, whose environment has been immensely distinct from today’s cycle. The Philippines then emerged from economic stagnation, high inflation, a debt moratorium and from the clutches of the two decades of dictatorship.
But if the 27-year average should come into play, then this means that the Phisix will need to deliver far greater returns than 2012, particularly 47.45% for 2013, just to reach the mean. This assumes that the Phisix boom ends next year, which I doubt.
Bubble cycles are not just about irrational pricing of securities, but rather bubble cycles represent the market process in response to social policies where irrationalities are fueled or shaped by credit expansion accompanied or supported by faddish themes.