SPX generational lows and highs

Updated: Aug 6, 2019

  • Since 1928, it is uncanny that SPX has experienced generational lows and highs spanning almost every 35-42 years or so. Note the generational lows during 1932 (4.40), 1974 (60.96) and 2009 (666.79) coincided with major bear market bottoms. It appears generational lows and highs in the past have coincided with periods of the enormous transfer of wealth from one generation to the next. For instance, baby boomer to the millennial. If a generational low did indeed occurred during 2009 then does this imply the next generational low may be many years from now, possibly during 2044/2051. Why? It takes decades for the transfer of wealth to have an impact on major financial assets (i.e., savings, home purchases, IRA, 401K retirement plans, and stock/bond investments). By extrapolating these very long-term SPX trends such as the internal trend line (black dash line) that dates back to 1929, it may be possible to estimate the value of the SPX in the distant future. Under the current wealth transfer scenario this would imply a SPX level closer to 9,145 (by 2044) and as high as 13,748 (by 2051). One important point, the 10-year moving average (green line) is currently rising at 2,024 and the long-term internal trend line is near 2,050. These levels may act as major support on any market setback thereby allowing for new generational highs in the future. On the other hand, a convincing breech below its 10-year moving average coupled with a violation of its internal trend line may also signal the start of the next major bear market possibly resulting in a retest of its 30-year moving average (red-line at 1,307).

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