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My last few blogs have been long, so as the pendulum swings, this one will be somewhat shorter.
We are in a secular stock BULL market that started in the Spring of 2009. Historically, they last for around 20 years. Secular stock market cycles are long cycles that determine the prolonged strength or the weakness of the markets. When we are in a secular stock BULL market, the bullish periods will be exceptionally strong and the bearish periods will be less significant. This current secular BULL cycle likely ends in the Fall of 2028 or the Spring of 2029… I’ll know when we get closer to the end.
We are also in a concurrent and overlapping cyclical stock BULL market that also likely runs until the Fall of 2028 or the Spring of 2029. Cyclical stock BULL markets run for around 6 years and this one started in the Fall of 2022, at the bottom of the 2022 bear market.
20-year secular bull cycles usually contain three 6-year cyclical bull market cycles plus two bear markets.
The two cycles, secular and cyclical, may end together in late 2028 and both would move in unison into a combined secular AND cyclical bear market which, if history proves to repeat yet again, the combined bearishness could end in a monster bear market crash. Perhaps the worst in history.
Crashes can be more rapidly profitable than can be any bull market. I made most of my personal money by shorting the entirety of the crashes of 2000 and 2008.
But right now, a super-strong and unstoppable bull market continues higher; I expect the final couple of years of this bull market to be parabolically strong with a market emphasis on artificial intelligence, robotics and innovative technology… sort of a super-copycat of the late 1990’s Dot.com technology bubble. If I am correct, people will be obtaining margin loans and mortgaging their house to get hold of extra money to invest in the stock market; a dangerous pursuit because these same people will get themselves trapped in the eventual bear market.
What will cause the next giant bear market? Massive U.S. government debt (Trump and the Republican Congress members are well into the process of passing a gigantic debt increase, mostly for tax savings for the top 5% and for military weapons, via Trump’s “Big Beautiful Bill.” This follows Biden’s out-of-control spending habits).
A headline from today’s CNBC financial website:
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So, how will we fund our debt? It is normally done via the U.S. selling Treasury bonds. But now, nobody wants to own U.S. Treasuries. I am writing this article on May 21st and today’s Treasury Auction was a complete dud and the stock market, that was flat, dropped 800 points on the Dow within minutes of the auction. Treasury bonds are essentially loans given to the U.S. government. Right now, nobody wants to loan the U.S. government any money. Most of MarketCycle’s client accounts own NO Treasuries. So, to fund our rapidly growing debt/deficit, the U.S. will “print money” and buy its own debt via a “not talked about” Quantitative Easing process… which will work… until it doesn’t.
This process of “printing money” to buy our own debt, coupled with Trump’s tariffs (which are entirely paid for by U.S. corporations and U.S. consumers) will create high inflation. High inflation makes the cost of servicing the debt rise and rise and rise to eventual unpayable levels. Specifically, this is what will cause the coming debt-ridden bear market. Unpayable debt and inflation that would be impossible to stop without the Federal Reserve raising interest rates beyond 20%. Yes, that is what I believe. I saw rates go to 19% in 1981. My first home mortgage was at 16%… and I was too dumb (and unstoppable) to understand that 16% is problematic.
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Right now things are good in the markets; where should we invest? Below is what the market itself is telling us to hold (and this is primarily where MarketCycle’s client accounts are positioned, although I am not suggesting that you should do the same): innovative technology, mega-cap technology, financials (large banks), consumer services and small to mid-cap utilities. Momentum stock ETFs would hold primarily those sectors just mentioned, and particular momentum ETFs are often winners (but some are poorly designed). We should also add “crypto” into the mix. REITs may not do as well as during past bull markets. Industrials should (eventually) get stronger again as the new administration in the White House backs further away from their destructive tariffs. At the end of this final super-bull market, energy will also get strong, just as it did during the Dot.com bubble bull market.
Invest in assets that generate outsized profits (Chart courtesy of Datatrek):
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Artificial intelligence, which offers humans astounding benefits along with accompanying terrifying consequences, will soon be the big (big!) money maker and its profit potential will continue to be under-estimated. My opinion is that the creation of artificial intelligence is unstoppable… sort of a modern “manifest destiny.” (Chart courtesy of Morgan Stanley.)
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Certain “momentum” ETFs are often a good method for catching the best assets during the best times, although they have to be watched carefully during downturns. MarketCycle always holds a minimum of 25% momentum stocks in our portfolios. (Chart courtesy of Alpha Architect.):
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That’s it… thanks for reading!
MarketCycle Wealth Management is in the business of managing your money through the market cycles. There is a contact tab on our website, but I can be reached via:
StephenAust@MarketCycleWealthManagement.com
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