This table shows you how stocks go through generational cycles, lasting roughly 17 years... One generation learns to love stocks. The next generation learns to be disgusted by them.
100 YEARS OF INVESTMENT GENERATIONS
1914-1930 market UP 159% in 16 years
1930-1947 market DOWN -30% in 17mo
1947-1965 market UP 503% in 18mo
1965-1981 market UP 35% in 16years
1981-1999 market UP 1054% in 18years
1999-2016 market DOWN?-? in 17years
My grandparents lived through the Great Depression. The experience scarred them so dramatically, they never bought stocks, ever.
My parents' generation lived through the Great Stock Boom, spanning most of the 1980s and the 1990s. Ten years of negative returns haven't killed off their faith in stocks yet... It'll be tough to convince them they'll never make money in stocks. (Another five to seven years of terrible times like now... that should do it!)
Is today the stock market bottom? Has the fear reached its peak right this second? Or will the fear get worse, and will the stock market bottom five years from now?
Unfortunately, I don't have the answer to those questions. But we do know stocks will find a bottom. We are closer to a bottom than a top. And we are closer to a historic buying opportunity than a historic high.
I will be a buyer again when the uptrend returns. I define the return of the uptrend as when the S&P 500 closes a week above its 45-week moving average. (History shows this is an incredible indicator, good for double-digit annual gains in stocks.)
This could take five years, or it could happen tomorrow.
My generation may end up like my grandparents... swearing off stocks forever. But that will be the wrong way to go. Chances are excellent that my kids' generation will have the luxury of a seventeen-year bull market, an epic tailwind.
market – where you could buy and go to sleep and still make money – should begin sometime in the next five years.
In the best case, we're almost there already. I'm seeing more cheap and hated opportunities than I ever have in my career.
I'm just waiting on the uptrend.