Since the 1920s, S&P 500 Index (SPX) has successfully alternated between periods of bullishness (structural bull trends) and bearishness (structural bears or trading range trends) without missing one beat.
Our past technical studies dating back to the 1800s also reaffirm these alternating long-term cycles of bullish and bearish conditions. Although SPX has already achieved many of our technical projections, including 2,524 (i.e., a 909-points technical base breakout in May 2013 above 1,615), the structural bull still has more legs.
Despite the impressive rally this past year and the numerous claims of the rally maturing, the current bull rally is only 8-years-old. It is relatively young by historical standards. If the bull rally ended today, it would be one of the shortest in history. In the past 200-years, structural trends in the US stock market, both bull, and bear spanned from 8-years to 20-years. The average duration is 14-years, implying another 6-years left or until 2027 before the current bull achieves its average.
The bull market of the last 8-years has seen stock prices rise threefold. However, the animal spirits that mark the top of a bull market are not yet apparent. Although the market may now be “bubbling” as the result of the low historical yields and accommodating monetary/fiscal policies, powerful structural bulls tend to sustain longer than expected and typically ends with a bang via a speculative bubble rather than a whimper.
On the yearly chart, powerful bullish outside year patterns have developed in SPX in 2016 and 2020, suggesting the current 8-year-old structural bull trend still has legs.
Another point, the changes in generational wealth or the financial resources passed down across multiple generations can materially impact financial markets. The accumulation of wealth and the transfer of wealth from one generation to the other influence consumer spending, housing markets, savings rate, investments, and retirement funding.
An individual’s wealth accumulation phase typically starts in the mid-30s. The collective process of building wealth influences the economy and hence the financial markets. The degree of influence can set the stage for the next structural bull or structural bear/trading range trend in stocks.
The impact and influence of the Baby Boomers generation (born between 1946 and 1964) were quite noticeable as they collectively ignited and sustained the 1982-2000 structural bull. We suspect the Millennials or Generation Y (those born between 1980 and 1994) will play an influential role in the current May 2013 to present structural bull trend.
The Millennials are tech-savvy as they grew up with computers, the internet, and social media. They have experienced the Great Recession and witnessed the 9/11 terrorist attack. The oldest of Generation Y will be in their mid-30s in 2015. Because of their sheer size (over 95 million strong in the U.S.), they can directly influence the U.S. economy and play a greater role in the US financial markets. The Millennials are still in their wealth accumulation mode. The youngest of Generation Y does not turn 35 until 2029. By 2029, the current structural bull trend will be 16-years old or slightly above the average duration of 14-years for past structural trends but far short of the longest structural bull/bear trends (20-years).
Enclosed below is a previously published chart of the SPX Index (dated 9/20/19). The chart highlighted the different generations over the past 100-years and their impact on the US stocks (i.e., SPX Index). The generations are Lost Generation (those born between 1980-1915), Greatest Generation (1910-1924), Silent Generation (1925-1945), Baby Boomers (1946-1964), Generation X (1965-1979), and Millennials or Gen Y (1980-1994).
Only time will tell if this trend is repeated. However, we recommend traders and investors review this chart, focusing on the generational wealth transfers and their influence on the structural trends of the US stock market.