Overly simplistic - non-inflation adjusted returns, but so far they are remarkably similar. I lined up the bottoms of 1974 and 1987 to the 2009 low.
Doing some "pattern analysis" to show that the magnitude of the current advance is similar when compared to previous booms.
What do we have in this cycle compared to 1973-1987 and 1987-2000? Back then we had major investment booms in computers, telephony, semiconductors, software, global trade, and demographics driving strong spending and this time demographics are significantly weaker, which should mute upside potential. Now we have Electric Vehicles, Solar Power, Battery Storage, Autonomous Driving, Electric Grid Infrastructure and other capital intensive growth ahead of us that the market will have to discount and factor. Massive efficiencies will drive economic and productivity gains.
The Investment Tax Credit by Reagan after the 1980 election might create a similar boom in investment this time, further propelling the capital investment boom. However, there can be market dislocations like we saw in the early 1980's into the mid 1980's, so it wont be a straight line advance.
I am doing some background research to add to my previous publications along this exact same line of reasoning, which is long term bullish.
Tim
12:48AM EST Dec 25th, 2017 - Merry X-Mas!
(Comments and thoughts: I could see the new Fed Chm together with the 1980's Tax Cut Pattern create the 15%-20% decline in 2018 before a year-end recovery. I can see the selloff happening in November next year after the election when people are scared when the Dem's retake the House, but the economy will be chugging along well enough to support that fear.) 1:00AM EST
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This is what it "Should" look like without my indicators at the bottom. A bit cleaner.
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Adding in these VERY INTERESTING tidbits:
In 1980, the market rallied BEFORE the election because of the awful inflation and stagnation under Carter. Reagan used that 30% rally in the stock market to pass a law to spur economic growth which cut rates and accelerated depreciation.
Today, the market rallied AFTER the election because of the awful election mess and slow economic growth. Trump used the 30% rally in the stock market to pass a new tax law to spur economic growth which cut rates and accelerated depreciation.
After the 1981 tax law change, the stock market gave back all of the gains of the past 12 months.
We could conclude that we will do the same, but there can be plenty of other variables to consider. THIS ONE is powerful all by itself though.
1:26AM EST
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Inflation was 13%-18% in that period also, so the decline was even bigger on a real-basis. I'll explore other variables in the coming days. Perhaps off to the library for microfiche hunting in the NYTimes. (Which is how I found the 1973 top was similar to the 2007 top while back in the year 2002! Great find!).
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More updates that I posted to the Key Hidden Levels Chat Room just now:
Re: Reagan Tax Cut (after 30% stock market rally) and ensuing stock market decline compared to the current Trump Tax Cut (after a 30% stock market rally) - There's reasonable logic for the drop now that the Tax Law has already passed.
Re: Other methods to find support/resistance. We use VIX spikes/retracements of 75% to give us key support levels for the overall market.
Comparison: The last time there was this much negativity and a high-grinding market was in 1994. That was when Orange County, CA went bankrupt after taking on HUGE BETS that interest rates would drop after President Clinton forecasted that deficits would disappear. California's overconfidence in the President's forecasts caused tremendous financial disaster. So when the breakout in 1995 happened it really left everyone confused and didn't believe the rally. The internet was just getting going back then with Netscape going public in 1995 with a furious gap up and rally. AND the market had a VERY TIGHT YEAR in 1994 and was one of the LOWEST VOLATILITY YEARS IN DECADES, as I recall. A 9% range or something ridiculous.
9:07AM EST 12/26/2017
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This pattern is playing out well - bouncing from one side to the other.
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Quote from above on Dec 25th: "I could see the new Fed Chm together with the 1980's Tax Cut Pattern create the 15%-20% decline in 2018 before a year-end recovery. I can see the selloff happening in November next year after the election when people are scared when the Dem's retake the House, but the economy will be chugging along well enough to support that fear."
I love your charts, especially under of year ones!
roxananechita
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Great analysis! Thank you.
A-shot
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If there is anything i miss, it is your posts and the Play button that shows how spot on you can be. Also, love the new pic! Still the most undervalued trader on TV.
ChartArt
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As of the end of April 2018 it looks more likely that the 1973-1987 cycle is repeating before our eyes.
Great analysis, Tim! I'm going to add your chart to my other cycle research:
IvanLabrie
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We're in the 80s maybe?
keshavreddi
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Thanks Tim, markets corrected 10%. Can we expect more downside?
IvanLabrie
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Interesting how it matched the timing for the top in 87.
Johnnyla22
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ES Weeklies to start: slowest oscillator 81 ~corrective to 75 before damage
Inside....2799.50 continuation/2791.50 range lift/2783.50 back fill
O1...2808.50/2774.75 loses edge, begins consolidation
O2...2818.75/2764.25
O3...2823.75-2827 next strong/2755.75 range drop accleration
Parabolic top 2880!!!!
A-shot
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With the last comment Tim, Do you foresee a correction before a swing up?
A-shot
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@A-shot, I guess this was the corona, cause it fit the pattern. Now we have a situation that happened 87 and 00