Recession: the aftermath

probable fake unemployment report on Friday

We are coming to the end of the longest yield curve inversions since the Great Depression. The longer the yield curve inversion, the bigger the bear market following. Here’s a nice chart by Peter on the Game of Trades YouTube channel.

The 1929-1933 bear market lasted 32 months. The difference this time seems to be that we’re going straight into war, which is generally good for the US stock market. Note that the bottom in the stock market did not come until June 1942, two and half years after the start of the war and only seven months after the US entered the war.

Many people say buy the dip this fall, but I’m not sure the war will be decided quickly. China will become the dominant economy in the 2030s. If we follow the Depression pattern, we won’t see the final bottom in the stock market until May or June 2027.

However, the “5” year in the decade has historically been quite strong, so we see significant churning over the next few years.

With the US policy rate coming down, likely swiftly, over the next year, the dollar and stocks may suffer, but as I have written, if a major war begins, probably in Europe or the Middle East, the stock market will benefit. European and Middle Eastern capital will flow to the US. I believe Martin Armstrong has a target of 65,000 on the Dow by 2032. Many believe the US is in a secular bull market based on demographics (this is also the basis for the Neocons’ belief they can win WWIII; see video below).

World War III, here we come. Pray for peace!

Average returns to the S&P 500 by year of the decade.

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