Harry S. Dent | Friday, October 11, 2013 >>
People like you, who follow our work, know that the primary cycles we track and monitor revolve around demographics.
Using our Spending Wave, we know when people will spend the most money, at age 46, and so drive our boom and bust cycles.
The Baby Boom spending cycle peaked right on time in late 2007, as I predicted it would almost 20 years ago. I also predicted that the cycle will bottom by late 2019 and not turn up again until around late 2023.
But there is another important cycle I discovered in the mid-2000s when the second bubble I’d expected in stocks didn’t inflate as much as I’d forecast. It’s the 34 to 36 year-long geopolitical cycle. It shifts from being positive for 17 to 18 years to negative for roughly the same time… like clock work.
See the chart below. The red lines accentuate the negative cycles.
Actually, this cycle is somewhat aligned with my Spending Wave cycle, which peaks about every 39 to 40 years. But there are times when these two important cycles are bullish simultaneously, and visa versa.
These two cycles are my most important longer-term cycles for developed countries like the U.S. and Canada. I also watch the 30-year commodity cycle, which is critical for emerging countries. It’s pointed down from late 2008 and continues that way into around 2023. That doesn’t bode well for emerging countries that export commodities for a living, even though they have strong demographic trends ahead.
But I digress.
If you look back at the last two cycles, we had a very positive geopolitical environment from late 1982 into early 2001, or about 18 years.
Then it turned negative. The tech-stock crash got more extreme and 9/11 hit in late 2001. Ever since then we’ve seen one failed war after the next, one troublesome dictator after the next, and now the Arab Spring. This latest wave of the cycle won’t turn up again until late 2019.
Welcome to the downside of the Geopolitical cycle.
The red lines I drew onto the above chart show when the geopolitical cycle turned negative, like late 1929 to late 1947. That period saw the Great Depression and World War II.
Then there was the negative period from late 1965 into late 1982, when we saw the greatest inflation of the last century, endless recessions, and the Vietnam and Cold Wars.
A positive period took place from late 1947 into late 1965. Other than the minor Korea War in the early 1950s and the Cuban Missile Crisis in the early 1960s, nothing much else went wrong during that period. That’s why it was called “Happy Days.”
Then there was the period from late 1982 into 2000. During that time we saw an unprecedented boom and a stock bubble greater than the Roaring ’20s, falling inflation, and no wars except 100 hours with Iraq, which we won easily.
But it was the times when the Spending Wave and the Geopolitical cycle were both positive that we enjoyed the best times for stocks and the economy. These included 1948 to 1965 and 1983 to 2000.
The times when both cycles were negative together were the worst. We experienced one such painful time from 1969 to 1982. Now we’re experiencing the next one. It started in 2008 and stretches into 2019, as I mentioned earlier.
After a desperate stimulus effort five years long, both the Geopolitical and Spending Wave cycles suggest we’ll see another depression.
So be prepared for a much deeper downturn ahead. And don’t say we didn’t warn you.
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