This 150-Year-Old Chart Says It’s Time To Buy Stocks

This 150-Year-Old Chart Says It’s Time To Buy Stocks
Stéphane Renevier, CFA

8 months ago2 mins

Back in the 19th century, an under-the-radar thinker may have discovered the secret patterns behind asset prices, a rhythmic dance of booms followed by busts and panic. But this wasn’t the discovery of a trading whizz or a mathematician: Samuel Benner was a humble pig farmer.

Benner unveiled his magic formula in a book way back in 1875. The cycle he identified moves based on three time sequences: prosperity in a 16-18-20-year pattern, commodity price lows in an 8-9-10-year pattern, and recessions in a 5-6-7-year one. To be clear, a 16-18-20 pattern means that you should expect 16 years between the first two prosperous periods, 18 years between the next two, and 20 years between the following two. After that, it goes back to 16 years between them.

This hidden gem has been rewarding investors for over a century. By following its cycles, you would’ve sold stocks in the “B” zone (1926, 1999, 2007, and 2019), just before the major crashes you can see in the “A” zone materialized. Most of the buying points in the “C” zone turned out to be savvy timing – which makes it extra interesting that 2023 is nestled right at the chart's bottom, hinting at a prime time to buy after gloomy days and low prices.

But let’s not get carried away. It’s true, markets move in cyclical circles– just as agricultural commodities sway to the rhythm of nature's cycles (harvest, solar, climate patterns) and human behavior is likely influenced by cycles of greed and fear. In that respect, seeing prices dance between good and bad years at somewhat regular intervals isn't exactly shocking.

But banking on a fortune teller’s predictions is a risky move – if it were that easy, top hedge funds wouldn’t need those pricey PhDs. Remember, too, that we tend to praise the charts that worked (by luck or otherwise) and forget the duds. So you’re best keeping your eyes on the real stock market drivers: the economy, corporate profit, and investor sentiment. It’ll take more than a few spooky sequences to predict where we’re headed next.



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Disclaimer: These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment advisor.

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