The stock market shows some interesting tendencies when it comes to its path throughout a decade. In this post I will review what occurred in the Decade Cycle over the last 100 years. Then I'll apply those tendencies to the current decade to see what may be underway. Keep in mind this is just one cycle of many cycles influencing the stock market but it's amazing how well it repeats.
First let me say that I start the count for the decade cycle with year 1. So even though we say 1930 is in the thirties, I count it as year 10 of the 1920s cycle since we don't count to 10 by starting with zero, we count 1, 2, 3....10.
So I looked at 10 decades starting with 1921 - 1930 using data from the Dow Jones Industrial Average (DJIA). See the table below.
Early Decade Low
The first fact that leaps off the table is that eight of the ten years showed the low for the decade in either year 1 or year 2. But let's take a look at the two decades that didn't show this.
1971 - 1980 had a low for the decade in year 4 BUT when we look closer you see that the low occurring prior to the high for the decade, happened in year 1.
And the 2001 - 2010 decade had a low of the decade in year 9, BUT the low prior to the decade high occurred in year 2. So the Decade Cycle indicates that our low made in 2022 has an 80% chance of being the low for the decade and a 100% chance of being the low prior to the high of this decade.
2nd Half Highs
The next fact that arises is that the the high for the decade occurs in years 7 - 10 in eight of the ten decades. See the second column in the table. And if we add in the high in year 6 for the 1961 - 1970 decade, then we can say that nine out of ten decades had their high in the 2nd half of the decade in years 6 - 10.
The 1971 - 1980 decade had a high in year 3 and was extremely volatile. It did have highs in year 6 and year 10 that came close to the year 3 high but the 1973 high remained the high for the decade.
So the Decade Cycle indicates that there is a 90% chance that the high for 2021 -2030 will occur sometime in 2026 - 2030.
Up in the Middle
The third fact that jumps out at you is the column titled Years 4 - 6. This is the middle of the decade and we are in year 4 right now. All ten decades were positive for these 3 years. So there's a high probability that on December 31, 2026 the DJIA will close higher than 37,689.54 which is where it closed on the last trading day of 2023.
Election Year in Year 4
We are in year 4 of the Decade Cycle and it's an election year. Five prior decades in the last 100 years had presidential elections in year 4. All of the highs for those decade cycles occurred in years 6 - 10. Those were the 1920s, 1940s, 1960s, 1980s and 2001 - 2010.
So based on 10 decades of data covering huge rallies, crashes, depressions, recessions, war and generations of stock market participants there is a high probability that the low for this decade has been seen and the high is still to come. One thing you can be sure of...there will be plenty of volatility.