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Recently Barry shared an old card from 1897 that a reader had sent him (see below). Another reader identified the cycle within it as the Benner Cycle or the 54 year cycle of stock market returns.
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Source: The Big Picture
This simple pattern shows that major market tops form in a recurring cycle of 16, 18 and 20 years concomitantly. If you add those three numbers, you get 54 years. The average then is an 18 year cycle (54 divided by 3). I’m not really sure why Barry called it the 56 year cycle since the numbers add up to 54.
In any case, the Benner Cycle looks to be a more granular definition of the familiar 18 year or 17.6 year cycle that we’ve looked at more than a few times already. Most recently, in “Recognizing Secular Bull and Bear Phases“.
If this guide had been handed down through generations by your ancestors and if it had been followed studiously, you would have done well. It isn’t a perfect overlay for the market. For example, it predicted a ‘panic’ in 1981. But it comes close to been eerily accurate.
Being a farmer, Benner was accutely aware of the weather and solar/lunar cycles. In fact, he postulated that the movements of the solar system were the primal cause of the cycle he had identified:
…the cause producing the periodicity and length of these cycles may be found in our solar system. It may be a meteorological fact that Jupiter is the ruling element in our price cycles of natural productions; while also it may be suggested that Saturn exerts an influence regulating the cycles in manufacture and trade.
The 18 year cycle is simpler as it shows the effect of the see-saw between commodities and equities. As commodities become more expensive, they squeeze the profitability of companies that use them as raw materials resulting in a boom and bust scenario between the two markets. It predicts that the secular bear market will end between 2016 and 2018. The Benner Cycle predicts that another ‘panic’ will occur in 2019. But on the brighter side of things, the Benner Cycle forecasts that 2012 will be a year of “Hard Times, Low Prices and a good time to buy Stocks”.
For more information on the origin of the Benner Cycle and its various modifications over the years by other cycle analysts, see David McMinn’s website. Or who knows, if we’re lucky, the cycle expert, Peter Eliades will chime in once again!
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