How important are long term debt cycles for investors?

During the “Trump rally” Americans and the world may have concurred that in these times, conventional logic about cycles can be defied. This came as the US stock market and world equities responded to a new reality of policies that were unexpected and factored into investor sentiment. Yet all this does not mean in any way that long term debt cycles are to be ignored.

What about long term debt cycles?

According to Compound Improvements, debt cycles will always remain a key investment principle with the only variables being productivity growth, short term and long term debt cycles. It argues that how these variables fluctuate, determines either a bull or bear market. To truly understand this philosophy, readers may want to  learn more about long term debt cycles.

Economies and investors have been sharpened up to live with an alternating reality of switching between inflationary and deflationary environments. During the former we witness quantitative easing to the point of infinity – when governments print money. During the latter, we witness austerity and spending cuts, the redistribution of wealth from rich to poor and debt restructuring, as has been the case with Greece, Portugal, Ireland and numerous others, with the same eventual end game for the US and UK economies.

How imminent is a significant crash or market correction?

People are so easily influenced by expert opinions, yet there is such a divergence and that is what causes analysis paralysis for smaller decision-makers. There will always be those who come forward after a major market shift to claim that they accurately predicted it. Sounds familiar? Well, this holds true for both sides of the argument: bull or bear. But as Warren Buffet said once: “A new wave of investors are about to learn some very old lessons”. Marko Yusko sees a 40 to 60% selloff and a “lost decade”, with Chris Stanton predicting the same by as early as March 31^st. Other well-known experts like Marc Faber is so pessimistic that he merely talks about “where to lose the least money in the next 10 years”.

Indeed the entire global equities market cannot be measured by the success of Tesla and Apple: there are various other indictors that matter. Yet there are those who are rather bullish on equities, for example David Lefkowitz at UBS wealth management and Michael Hartnett at Bank of America Global Research are closer to the camp of those who are irrationally bullish on equities  in Q1 of 2020. These are big names in the bullish segment with a credible track record too.

Obtaining a meaningful analysis and fresh perspective:

Given this wide discrepancy in views from successful investors on both sides of the argument, it may be useful to consider other sources with a unique investment philosophy and its own credible track record. More importantly, obtaining a perspective that does not originate from banks that may be betting against the whole world in an information war that some analysts may find manipulative.

This is exactly where Compound Improvements is aiming to make a difference: to bring market news that is neutral, based on facts, where the potential for bias is being removed. Discovering a potential 2020 portfolio that can be invested with a “set and forget” approach for the remainder of the year is one of the pathways they support for the passive investor. Yet for those who are more active will also find it valuable: when requiring weekly company reviews with up to date stock reports and On Spot buying and selling tips. Premium webinars and courses are also available for those seeking to educate and equip themselves with better financial knowledge.

Conclusion

The Fed is ready to cut rates – yet long term debt exceeds the proportions that we have seen during the great recession. Yes, the dynamic of the global economy is different today in the sense that it is more developed and more responsive, but reality cannot be defied: we cannot forever inflate our way out of debt. Change may be the only constant factor. It remains to be seen just how prepared investors are.