On November 6, 2007 – right before the U.S. plunged into the Great Recession – I published a warning.
I wrote to a group of my subscribers:
The market is now beginning to tell us what it is going to do in 2009. At this early stage, a low [in] early March would not surprise, then a 180-day run into early September.
The S&P 500 hit the low on March 9, 2009. From then, the market ran up strongly into September, continuing on into early 2010.
The reason I was able to predict the exact timing… to the month… for the March 2009 low, is due to the lessons I learned from studying the 18.6-year cycle.
This is very important to understand. If you understand this concept, nothing in the markets, or even the whole economy, will ever surprise you again.
The Market Is Predictable
People often say that things happening in the market are “unprecedented.”
But that’s not true. If you look back at history, there are always precedents. And not just one-off events, but events that happen in a predictable way.
For instance, since 1955, the Fed has gone through 11 key interest rate cycles. Every single time that happened, house prices went up in the U.S.
Take one example, between 1975 and 1979.
Interest rates went from 7% to 20%. The mortgage rate went from 8% to about 16%. The inflation rate climbed to 15%.
And house prices in the U.S. went up by 59%, based on data from the Case Shiller Home Price Nominal Index. You can see that index in the chart below…
Look at other timeframes of rising interest rates, and you’ll see the same pattern for house prices.
Interest rates and house prices both rose in 1982-1984 when the 10-year Treasury yield soared from 10.4% to 13.8%. They also rose in 1993-1994 when the 10-year yield increased from 5.4% to 7.8%.
Not surprising. Because when you’ve got inflation, where’s one of the best places to put your money? Housing.
History Does Repeat
From what I can see today, I don’t expect history to do anything different.
We might see interest rates drop a little in 2025, similar to what happened in the 1920s. That’s likely when the U.S. will have to rescue the rest of the world… as it usually does.
But not yet. Not now. And not because I say so. But because of the 18.6-year cycle.
See, my analysis isn’t based on opinion. It’s based on hundreds of years of history and data.
In my book, The Secret Life of Real Estate and Banking, I studied the cycle’s history, going back 248 years.
From peak to peak, the average cycle lasts 18.6 years. That tells us that 2025-2026 is when we’ll see the top of this current cycle.
Just as we saw it top in 1955, 1973, 1989, and 2007.
Regards,
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Phil Anderson
Contributing Editor, Inside Wall Street with Nomi Prins