If we date back to 1900 and look at the stock market until now, we can notice a pattern. The market moves up for 17.6 years and moves sideways for another 17.6 years before repeating. This is not precise science but it’s just a pattern that has played out in the stock market. Art Cashin, Director of Floor Operations for UBS Financial Services and CNBC Market Commentator, noticed this first and he has dubbed it “The 17.6-Year Stock Market Cycle”.
Stocks go up 7-10% per year on average in the long run but historically they have extended periods when nothing happens followed by long periods of returns well in excess of normal. From 1966-1982, the market went bounced around but essentially went sideways (DJIA went from ~880 in 1966 to ~870 1982). From 1982-2000, the market went up more than 10 times (DJIA went from ~870 in 1982 to ~10,900 in 2000). The current cycle started in 2000 and according to the pattern, we are going to move sideways till 2017! However, we have to keep in mind that it’s just a pattern and we can only know in hindsight if it has worked.
The market may move sideways in the next 6-7 years but there will always be opportunities present. The market always mis-prices companies so value investors can advantage of Mr Market’s mood swings.
Check out the following Youtube video by Art Cashin.
4 thoughts on “The 17.6-Year Stock Market Cycle”
Somehow, I remain extremely skeptical of people who claim they can read “patterns” in stock market movements over a long period. If you delve deep enough you can probably find a lot of “patterns” in random data anyway.
What you said is true as well. I just take whatever patterns that was predicted with a pinch of salt. I don’t rely on it 100%. It’s just for the fun of it that I look at patterns.
Sometimes patterns do occur due to it being a self-fulling prophecy. An example would be “Sell in May and go away”. Not every May is bearish but at least there will be a general fear in the market during this period.
MW, refering to Efficient Market Theory? haha!
EMT is no longer efficient and it never was. Lol.