In a research note, Stephen Suttmeier of Bank of America makes below case
Secular bull market still goingA middle-aged secular bull market that keeps on going In April the SPX will enter the 11th year of its secular bull market signaled on the April 2013 breakout above the 2000 and 2007 peaks. The secular bull markets from 1950-1966 and 1980-2000 lasted 16 and 20 years, respectively, which means that the current secular bull market is middle-aged and can extend until 2029 to 3033 (kingran: I think he meant 2033). In our view, the 2020 dip resembled the dips in 1987 and 1957. If this was “halftime” for the current secular bull market, it does not rule out a 14-year secular bull market ending in 2027.
Secular versus Cyclical: Secular means multi-business cycle. Cyclical means tied to the business cycle. Secular bull and secular bear markets experience cyclical bull and cyclical bear markets as well as economic expansions and contractions.
According to this note, there is anywhere between 3 to 5 years of bull market is ahead of us. Of course there will be intermittent sell off, but stay bullish and don’t sit on cash. Importantly don’t try to time the market
For those who are not familiar with presidential cycle, it means the first 2 years are sluggish, 3rd year of a president’s term the markets are positive and fourth year so-so or a loss. For detailed information see below
I have not looked at historical returns, just the last 2 presidents cycle. We know both Trump’s and Biden’s term the markets were up, and specifically 2019, which is the fourth year, was up. I have looked at other data, I don’t think this is a stronger indicator.
While there are folks who think AI impact benefit is imminent, I am not so sure. Also, the humanoid cost vs benefit and a billion humanoid immediately ready to be deployed are just realistic in the next 3 to 5 years.
Generally military is an early adopter of technology. I want to see a humanoid or robots in army. Military has unlimited budget, and if they burn few trillion billion $$$ and has nothing to show for it, still no questions asked, and no one pays the price. So that’s where I am expecting to see before it gets to 1 billion humanoid.
While all these futuristic scenarios from technology point of view is great, I think human society, governments are not ready for a wider deployment… A billion humanoid means lots of unemployment. How governments are going to handle that? Are we going to have universal income in place? We have a congress which wants to increase the retirement age and wants you to work till 75 or even 80. Lot of thinks we need to resolve. Frankly, I would like to see AI is slowed down. We need time to understand and adjust. I think human society, governments are not ready for a wider deployment.
Humanoid will not provide benefits in the near term that move any sort of needle on any sort of macro graph.
HOWEVER! AI in programmatic context has been adding value significantly for 2 years ALREADY. This is accelerating. It is prevalent everywhere you look.
Because it doesn’t wear a cool suite of physical features, but, instead remains virtually on your devices and behind interface points, it doesn’t get credit for what it is doing.
Software is eating the world. True when it was first said. Even truer now.
It’s a bit more complicated. WendyBG explained on the old board beautifully the logic behind it. To sum it up:
1st+2nd year = Bad — Because new president now introduces his agendas unpopular stuff, in hope until the next election it will be forgotten, bringing in what markets hate most: Insecurity. Especially much when it’s a new president.
3rd year = Very good ---- Because insecurity flattened out, markets are back to normal business. Plus old president/party wants to be re-elected => benefits for the voters, stimulating the economy etc. => Hope, trust, optimism.
4th year = Good — Because of the effects of those measures - but before the election the optimism wanes, insecurity starts, therefore last part of 4th year is flat or negative.
Regarding longer history instead of the last 2 cycles:
Grantham: 7 months of the Presidential Cycle, from October 1st of the second year (this cycle, 2022) through April 30th of the third year (2023), the returns, since 1932, equal those of the remaining 41 months of the cycle! This has a less than one-in-a-million probability of occurring by chance, pretty remarkably, and it has been about as powerful in the last 45 years as the previous 45 years. We are now in this sweet spot, which once again is up nicely so far.
It never ceases to amaze me, how those who swear by long term buy and hold are so myopically focused on capturing the next turn Please refer my original post. Specifically about the secular vs Cyclical and the potential length of the bull market.
Presidential cycle can very well playout within the bull market. As I am getting older, I am willing to sit tight on my rear-end for longer period.
Who are those? Grantham? Me? I since ages have and hold my insurance policy, called “Berkshire”. Apart from that I made hundreds of options trades each of the last years. Not exactly LTBH.
Please refer my original post. Specifically about the secular vs Cyclical and the potential length of the bull market.