What it means
The word comes from the Latin for age or generation, and economists use it for forces that persist across many years. A cyclical movement rises and falls over a business cycle, which may last a few years.
A secular movement is the underlying direction that continues through those ups and downs. A secular bull market is a long period during which share prices trend upwards, even though there are corrections along the way.
A secular bear market is a long period of flat or falling prices, again with rallies inside it. Analysts often define these periods as lasting a decade or more, though there is no exact rule.
Secular growth refers to a business or industry that is expanding because of long-term forces rather than the state of the economy. Examples often cited include an ageing population increasing demand for health care, or the shift of shopping and services online.
These companies may do reasonably well even when the economy is weak. Secular trends should be separated from cycles when making decisions.
A manager who mistakes a temporary boom for a secular shift may overinvest, while one who misses a real structural change may fall behind. Secular trends can also reverse, usually because of technology, regulation or changing consumer behaviour.
For a business reader, the practical lesson is to ask whether a change is a passing swing or a lasting shift. Planning capacity, hiring and investment look very different in each case.
Using the word correctly in meetings also helps you separate a one-off event from a long-term structural force. Data helps tell the two apart.
Looking at a measure over many years, such as sales, prices or market share, and comparing strong and weak economic periods, shows whether the trend continues regardless of the cycle. If it does, it is more likely to be secular.
In practice
Real-world examples.
Example
An investment strategist tells clients that the market is in a secular bull phase because prices have climbed over many years despite several sharp corrections. She advises staying invested and buying dips, since corrections inside a long trend have often been followed by new highs. She also warns that long trends eventually end, so she asks clients to review their plans every year.
Example
A business planner at a medical equipment supplier notes that demand is rising because the population is ageing. He treats it as a secular trend rather than a short-term boost. The company invests in a new factory with a ten-year view, because it expects demand to keep growing even if the economy has a weak year along the way.
Example
A retailer of printed greeting cards sees steady decline in sales that began long before the latest recession. Its finance director concludes the decline is secular, caused by a shift in how people send messages, not a cyclical dip. The company changes its product range and puts more effort into gift items and digital offerings.
Case study
Seen in the real world.
Northfield Paper Products is a fictional manufacturer that saw sales of printed forms fall for several years. Management first believed it was a cyclical dip caused by a weak economy and kept spending on capacity.
The new finance director, Sofia, compared the data over fifteen years and found that the decline continued even in strong economic years. This is an illustrative story, but it shows the importance of the distinction. She concluded the trend was secular, and the company shifted money into digital document services and trimmed its printing plant.
Management also tested the idea by asking customers how they now handled their paperwork. Most replied that they used digital tools, which supported Sofia's conclusion and helped the board agree to the new direction.
Watch out
Common mistakes.
- Reading secular as meaning non-religious in a finance setting. In markets it means long-term, as opposed to cyclical.
- Treating a secular trend as permanent. Long-lasting trends can and do end when technology or behaviour changes. A company that assumes a trend will last forever may overbuild capacity and be left with idle plant when the trend fades.
- Calling any rising market a secular bull market. The term suggests a trend lasting many years, not a single good year. Using the label too early can encourage investors to ignore real warning signs.
Questions
People also ask.
What is the difference between secular and cyclical?
A secular trend lasts for many years and is driven by structural forces, while a cyclical movement follows the ups and downs of the economy.
What is a secular bear market?
It is a long period, often a decade or more, when prices are flat or trend downwards with rallies along the way. Investors in such periods often find that patience and income matter more than quick gains.
What is a secular growth company?
It is a business whose growth comes from long-term forces rather than from the strength of the economy at any one time.
From the founder's library
Take it further with the book.
Build your financial confidence beyond this definition. Shihan's full-length guide, Accounting Fundamentals, takes the same plain-English approach and turns it into a complete, practical playbook for non-finance managers, business owners and students - with chapter-end quiz answers and presentation slides included.
25% off with code MMHQ25, applied at checkout. Priced in USD - checkout may show the equivalent in your local currency.
View the book and save 25%Related