Australian (ASX) Stock Market Forum

Macro Cycles 2014-2018

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Oil Price History:

chart-of-the-day-crude-oil-history-june-2011.jpg

What is interesting to me is look how far away the bottoms tend to be from the tops in the real money line.

EG. 1920 to 1931 / 1980 to 1998

It tends not to actually reach a bottom in real money (inflation adjusted) for 10-20 years as the macro cycles tend to be around 30 years.
 
Some interesting data I found regarding the number of months between the First Fed Rate Hikes and next Recession since WW2 in the U.S.

I've put the year in (brackets), if you applied that number of months to this current cycle that started Dec 2015.

98 (2024)
84 (2023)
---
37 (2019)
36 (2018)
35 (2018)
33 (2018)
29 (2018)
---
19 (2017)
11 (2016)

I find it extremely difficult to believe we will avoid a recession (and a likely -30% drawdown) by end of decade.

A -30% drawdown has passed through every decade in Australia since WW1.
 
shouldaindex said:
I find it extremely difficult to believe we will avoid a recession (and a likely -30% drawdown) by end of decade.

A -30% drawdown has passed through every decade in Australia since WW1.
Click to expand...

Is that -30% from the highs or current levels?

TIA
 
This is the XAO and an Oil Price ETF, you can see over the past 6 months, where oil goes the market goes, symbolised by matching peaks and troughs. Oil Price movements are magnified by about a factor of 5 compared to the XAO.

Screen Shot 2016-04-05 at 5.45.39 PM.png
 
Done some more research on U.S Recessions and Market Tops and Bottoms.

This is the data on the S&P 500 since 1928:

How long before a recession starts, do we reach a market top (in months):

12, 12, 10, 8, 8, 6, 5, 3, 2, 0, 0, 0, 0, 0

How long before a recession ends, do we reach a market bottom (in months):

10, 9, 8, 7, 6, 6, 6, 6, 4, 4, 4, 3, 3, 0

So you can see the market is forward looking up to a year.
 
Hi,

I'm currently focused on Recession research rather than markets at the moment, as I think we're at the stage where that is the primary factor that has a high level probability of swinging the market outcome roughly 40-50% over the coming years (EG. XAO 4000 vs 6000).

Interesting Info:

- Since 1780, the longest time from the end of a U.S Recession to the start of the next U.S Recession is exactly 10 years. This would mean a centuries old record would be broken if the U.S lasted exactly 3 more years (until April 2019) without a Recession.

- Since 1926, 2 out of 3 recessions have started in the 2nd half of the year.
 
odds-on said:
Excellent thread. Great reading.

Have you come across the Coppock Curve? If not, you might be interested in it.

https://en.wikipedia.org/wiki/Coppock_curve
http://www.investopedia.com/articles/active-trading/031814/using-coppock-curve-generate-stock-trade-signals.asp

I find it interesting that the economist discussed mourning with the church bishops. Basically, give it 12 to 14 months for people to get over a loss.

Cheers
Click to expand...

Coppock is interesting and well worth back testing yourself on the charts to see how well it works as a leading indicator and the typical lag between the signal and markets change in direction. Looks bearish to me right now in US and here, but please try it yourself.
 
shouldaindex said:
Hi,

I'm currently focused on Recession research rather than markets at the moment, as I think we're at the stage where that is the primary factor that has a high level probability of swinging the market outcome roughly 40-50% over the coming years (EG. XAO 4000 vs 6000).

Interesting Info:

- Since 1780, the longest time from the end of a U.S Recession to the start of the next U.S Recession is exactly 10 years. This would mean a centuries old record would be broken if the U.S lasted exactly 3 more years (until April 2019) without a Recession.

- Since 1926, 2 out of 3 recessions have started in the 2nd half of the year.
Click to expand...

If you look at the yield curves below what do you forecast?
 
Yield curves below.

While there havent been two consecutive quarters of negative GDP since '91 for a classic recession, the GFC and 2011 would be near enough for me. The current GDP growth is rather weak and trending in range which I would imagine won't change until after the US elections and interest rates start rising.

Also, the unemployment rate has peaked in Jan'15 supporting the view that the economy has peaked for the current cycle...so are we in a recession now? If this bear market continues, its a good leading indicator of economic malaise.

Thoughts?Yield Curves 2013-2016.JPG
 
I've kept an eye on Yield Curve and Unemployment in the U.S, at this stage it's all fine.

I think there are some key cyclicals that don't look good at all for around 2018 though.

Just looking at some seasonal market data this decade, the May-November seasonal weakness, peak to trough drawdowns:

2010 April to June -16%
2011 April to September -24%
2012 May to May -10%
2013 May to June -11%
2014 August to October -9%
2015 April to September -17%

Also I remember the strong seasonal period of 30th November to 30th April has only lost 3 times in the past 25 years (or something very similar):

November 30th 2015 = 5218
Februrary 12th 2016 = 4762 (All but defeated)
April 14th 2016 = 5187 (The champ is back / winning total return inc. dividends)

Much rather have history on your side.
 
Hi shouldaindex, really appreciate your thread.

As the end of the calendar year approaches do you have any further commentary?
 
So where are we now after the "Trump rally"?

I'm thinking of the US and other markets as well as Australia here. A few points:

S&P 500 p/e ratio is the third highest since 1870. The only two periods that were higher were associated with the year 2000 "dot.com" bubble bursting and more recently with the Global Financial Crisis.

The Dow to US GDP ratio is very high by historic standards, being roughly the same as late 1999 and higher than the lead up to the GFC.

The present US business cycle, time between recessions, is the third longest since WW2.

Australia's period since the last recession is now the second longest on record globally. If we go more than another year without a recession then we'll hold the global record.

US Federal Reserve is raising interest rates. Historically this has ended with either the share marker or the economy (or both) falling in a heap. The extent and duration of rate raising required to bring about that outcome has varied but in the vast majority of cases Fed raising rates = something goes "bang" sooner or later.

House prices in Australia would be another one to add to the list.

And so on. By most historic measures we seem to be at an extreme at the present time.

I'm not going to try and call a top in the market but my overall thought is that we're much closer to a major top than to a major bottom at this point. The overall market could still rise but whether it's later this year or next year that it changes direction I think we're much closer to the end than to the start of this post-GFC bull run.

Anyone else have any thoughts on where we're at right now?
 
http://www.pionline.com/article/201...-next-recession-likely-to-start-in-march-2019

This is an economist I follow as he's statistics based, rather than projecting biases or narratives that you find a lot in articles online.

Based on length of expansions he has benchmarked March 2019.

I've seen research that suggests markets tend to peak at sometime in the 12 months prior, so if that all plays out we might have another 12-18 months of the Trump rally.
 
kitdoctor said:
Hi shouldaindex, really appreciate your thread.

As the end of the calendar year approaches do you have any further commentary?
Click to expand...
I miss shouldaindex's posts, he hasn't been seen around for almost a year now. Come back shouldaindex, we miss ya.
 
Smurf1976 said:
So where are we now after the "Trump rally"?

I'm thinking of the US and other markets as well as Australia here. A few points:

S&P 500 p/e ratio is the third highest since 1870. The only two periods that were higher were associated with the year 2000 "dot.com" bubble bursting and more recently with the Global Financial Crisis.

The Dow to US GDP ratio is very high by historic standards, being roughly the same as late 1999 and higher than the lead up to the GFC.

The present US business cycle, time between recessions, is the third longest since WW2.

Australia's period since the last recession is now the second longest on record globally. If we go more than another year without a recession then we'll hold the global record.

US Federal Reserve is raising interest rates. Historically this has ended with either the share marker or the economy (or both) falling in a heap. The extent and duration of rate raising required to bring about that outcome has varied but in the vast majority of cases Fed raising rates = something goes "bang" sooner or later.

House prices in Australia would be another one to add to the list.

And so on. By most historic measures we seem to be at an extreme at the present time.

I'm not going to try and call a top in the market but my overall thought is that we're much closer to a major top than to a major bottom at this point. The overall market could still rise but whether it's later this year or next year that it changes direction I think we're much closer to the end than to the start of this post-GFC bull run.

Anyone else have any thoughts on where we're at right now?
Click to expand...

My Fairly uninformed opinion about USA is similar to what you expressed - Overvalued but I don't have the data to confirm or rebuke my opinion, so its a worthless, however I'm stuck with it as holding no opinion seems to be really difficult.

In relation to Australia, I have just been updating my data and despite a 'gut' opinion which is more negative - the data sway me to being a lot more positive.

If it wasn't for housing valuations I would be very positive - So I will go with cautiously positive as housing valuations and the debt associated could (but not necessarily) throw a spanner in the works for a decade or so.

The conundrum for me with housing is if it stays elevated then Australia has created an intergenerational class system based on home ownership. Whether this development stands long term (I hope it doesn't) largely falls into the realm of politics and about that I wouldn't have a clue.

Some of the data driving the optimism is contained in this thread.
https://aussiestockforums.com/threads/xao-bull.30571/
 
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Bill M said:
I miss shouldaindex's posts, he hasn't been seen around for almost a year now. Come back shouldaindex, we miss ya.
Click to expand...
By my quick reckoning XAO has now been in drawdown for 112 Months which is an all time record for the Aus index.

Miss Shoulda who woulda put it in perspective of other historical drawdown durations endured both on the XAO and in other countries.

Hope he pops back up some time.
 
Smurf1976 said:
US Federal Reserve is raising interest rates. Historically this has ended with either the share marker or the economy (or both) falling in a heap. The extent and duration of rate raising required to bring about that outcome has varied but in the vast majority of cases Fed raising rates = something goes "bang" sooner or later.

Anyone else have any thoughts on where we're at right now?
Click to expand...

Historically the share market does really well at the beginning of the rate rise cycle. So it wouldn't surprise me to see continued strength for 1-2 years. But then... our current starting point is like no other times in history. We never had the negative rate or the level of leverage like we have now. So may be a relatively small and slow pace of change in rate will have a quicker and larger impact than history suggests.

I often look back at "history" and found history to be so inadequate. The history of major markets and global capitalism is really really young. Just because something happened a few times during this early development stage, doesn't mean it is guaranteed to happen again in the future. It's a bit like someone charting the height of a 12 year old child and projecting that she will be 2.6m tall by age 30. We don't know what "stop growing" means in the capitalist world yet... I think I will see it in my lifetime (with 40-50 years to go), and history might tell us whether we are at a major major high or not.
 
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