Most Popular
1. THE INFLATION MONSTER is Forecasting RECESSION - Nadeem_Walayat
2.Why APPLE Could CRASH the Stock Market! - Nadeem_Walayat
3.The Stocks Stealth BEAR Market - Nadeem_Walayat
4.Inflation, Commodities and Interest Rates : Paradigm Shifts in Macrotrends - Rambus_Chartology
5.Stock Market in the Eye of the Storm, Visualising AI Tech Stocks Buying Levels - Nadeem_Walayat
6.AI Tech Stocks Earnings BloodBath Buying Opportunity - Nadeem_Walayat
7.PPT HALTS STOCK MARKET CRASH ahead of Fed May Interest Rate Hike Meeting - Nadeem_Walayat
8.50 Small Cap Growth Stocks Analysis to CAPITALISE on the Stock Market Inflation -Nadeem_Walayat
10.Apple and Microsoft Nuts Are About to CRACK and Send Stock Market Sharply Lower - Nadeem_Walayat
Last 7 days
The NEXT BIG EMPIRE WILL BE..... CANZUK - 25th June 22
Who (or What) Is Really in Charge of Bitcoin's Price Swings? - 25th June 22
Crude Oil Price Forecast - Trend Breaks Downward – Rejecting The $120 Level - 25th June 22
Everyone and their Grandma is Expecting a Big Stocks Bear Market Rally - 23rd June 22
The Fed’s Hawkish Bite Left Its Mark on the S&P 500 Stocks - 23rd June 22
No Dodging the Stock Market Bullet - 23rd June 22
How To Set Up A Business To Better Manage In The Free Market - 23rd June 22
Why Are Precious Metals Considered A Good Investment? Find Out Here - 23rd June 22
UK House Prices and the Inflation Mega-trend - 22nd June 22
Sportsbook Betting Reviews: How to Choose a Sportsbook- 22nd June 22
Looking to buy Cannabis Stocks? - 22nd June 22
UK House Prices Momentum Forecast - 21st June 22
The Fed is Incompetent - Beware the Dancing Market Puppet - 21st June 22
US Economy Headed for a Hard Landing - 21st June 22
How to Invest in EU - New Opportunities Uncovered - 21st June 22
How To Protect Your Assets During Inflation - 21st June 22
AI Tech Stocks Current State, Is AMAZON a Dying Tech Giant? - 20th June 22
Gold/Gold miners fundamental checkup - 20th June 22
Personal Finance Tips: How To Get Out Of A Tough Financial Situation - 20th June 22
UK House Prices Relative to GDP Growth - 19th June 22
Will Global Markets Be Pushed Deeper Into Crisis Event By The US Fed? - 19th June 22
Useful Things You Need To Know About Tweezer Top Candlestick Pattern - 19th June 22
UK House Prices Real Terms Sustainable Trend - 17th June 22
Why I’m buying the “new” value stocks… - 17th June 22
Optimize Benefits from R&D in Software Product Development with an R&D Tax Credit Software - 17th June 22
Want To Save On Your Business Energy? Here Are Some Helpful Tips - 17th June 22

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Stock Market Secular Cycles

Stock-Markets / Stock Markets 2014 Nov 07, 2014 - 01:59 PM GMT

By: Donald_W_Dony


Many investors and analysts are expecting a resurgence in commodity prices. Yet a review of historical data would suggest that the current movement in natural resource prices, the US$, stock markets and the business cycle are all part of a well-defined pattern.

The relative performance between commodities and stocks, based on a 135 years of data, indicates that the two asset classes shift in leadership on average about every 18 years.

In Chart 1, we see the S&P 500 over the last 50 years. The periods of time (1965-1979, 2000-2012) when commodities outperformed the S&P 500, it created an extended consolidation for the US stock index.

When stocks (S&P 500) outperformed commodities (1950-1965, 1980-2000, 2012 to present), an extended period of growth developed for the S&P 500.

Some of the principal characteristics of a secular commodity cycles are increased volatility, deeper and longer corrections, downward trending US$, shorter business and stock market cycles.

Some of the principal characteristics of a secular stock cycles are lower volatility, shallow and short duration corrections, an upward trending US$ and extended business and stock market cycles.

For commodities, one of the prime elements that dictates price direction, is the U.S. dollar. As natural resources are priced in US$, a rising dollar makes commodities more expensive.

Chart 2 illustrates the impact on commodity prices in an environment with an escalating dollar.

For example, from 2011, brent is down 36%, copper is off 35%,
gold has dropped 40% and corn has declined by 55%.

Bottom line: Secular stock and commodity cycles last, on average, about 18 years. The current cycle is a stock cycle (S&P 500). This means that, based on 135 years of data, stocks (S&P 500) should outperform commodities for about the next 15 years. This cycle started in 2012/13.

Investment approach: With the evidence pointing toward a prolonged stock (S&P 500) cycle, we would suggest lowering commodity positions on any counter-trend rallies and focusing on non-commodity sectors.

By Donald W. Dony, FCSI, MFTA

COPYRIGHT © 2014 Donald W. Dony
Donald W. Dony, FCSI, MFTA has been in the investment profession for over 20 years, first as a stock broker in the mid 1980's and then as the principal of D. W. Dony and Associates Inc., a financial consulting firm to present.  He is the editor and publisher of the Technical Speculator, a monthly international investment newsletter, which specializes in major world equity markets, currencies, bonds and interest rates as well as the precious metals markets.   

Donald is also an instructor for the Canadian Securities Institute (CSI). He is often called upon to design technical analysis training programs and to provide teaching to industry professionals on technical analysis at many of Canada's leading brokerage firms.  He is a respected specialist in the area of intermarket and cycle analysis and a frequent speaker at investment conferences.

Mr. Dony is a member of the Canadian Society of Technical Analysts (CSTA) and the International Federation of Technical Analysts (IFTA).

Donald W. Dony Archive

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in