Tuesday , 26 September 2023

The Stock Market: The Next 3 Years Could Be Horrid!

Stock market return fluctuations tend to cycle…[and] this article looks at 9 cycles…[ranging from] a span of 32 days…to 56.5 years. Collectively, the cycles suggest the stock market should probably rise to all-time highs at least into late July but the path for the rest of the year looks less clear – [and] the next three years could be horrid.

1. The 12 Trading-Day Cycle…will peak July 23.

2. The 42 Trading-Day Cycle…heads down until August 25.

3. The 77 Trading-Day Cycle…may be headed for a peak around August 31.

4. The 136 Trading-Day Cycle may trend higher until December 22.

5. The 326 Trading-Day Cycle has an estimated peak for late April, 2021.

Combining the above five daily cycles (see original article for details)…we can estimate the S&P 500 (SPY), [as follows].

6. The 31-Month (2.6 Yr.) Trading Cycle

  • The 31 months ending June 2020 will return about 20.8% (last point on blue line) which is a bit higher than the model in green estimated at 18.6%.
  • The next 31 months to January 2023 are estimated to lose 2.9% (last point on green line) after inflation and dividends. The best fit sine wave bottoms November 2023.

7. The 62-Month (11.3 Yr.) Trading Cycle suggests the period ending March 2023 will lose 24.1%.

8. The 271-Month (22.6 Yr.) Trading Cycle estimates that the period ending March 2023 will lose 4.54%, which suggests a 54% loss between now and then.

9. The above four models combined…show the following 56.5 year projection for the S&P 500:The trended model comes to a multi-year high in July 2020 and hits a low point in July 2022.

I expect the trended version understates the potential decline.

  • Above average returns the last 30 years pushed the trend higher than it was in the 100 years before that.
  • I believe this steeper trend is temporary
  • and that weaker returns the next several years will lower the trend.

…[A look at the] nine cycles together…[provides the following estimate for] the S&P 500.

I think the above represents a best-case scenario [even though] the trend going forward could be significantly weaker than the history the trend is based on…

Editor’s Note:  The original article by John Early has been edited ([ ]) and abridged (…) above for the sake of clarity and brevity to ensure a fast and easy read.  The author’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article.  Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor. Also note that this complete paragraph must be included in any re-posting to avoid copyright infringement.

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