Are there long-term cycles that affect us? Unless you study history, it is difficult to see them. In a previous commentary, I quoted investor Ray Dalio who explained in his book, The Changing World Order, that he became more aware of long-term trends in the economy and made better financial decisions once he studied history. Here are three cycles that many analysts have been talking about.
The first is a 250-year revolutionary cycle. That last hit in the 1760s with the American Revolution and the beginning of the Industrial Revolution and free market capitalism. And 250 years prior to that was Martin Luther and the Protestant Reformation.
The second cycle is an 80-year financial cycle. Some commentators argue that it used to be a 58-60-year cycle but is now an 80-year cycle. During this cycle, the economy moves through four seasons. These range from innovation to economic growth to an eventual economic correction.
The third cycle is a 50-year technology cycle. From 1870 to 1930, we had the development of electricity and the internal combustion engine. From 1930 to 1980 was a mass production cycle. The 1980 to 2030 cycle involved telecommunications and computer technology.
The interesting thing about these three cycles is they are all converging about now. Each cycle will bring about changes different from what came before it. I am reminded to the famous quote from Mark Twain who observed: “History never repeats itself, but it does rhyme.”
How should we respond? Like the sons of Issachar in the Old Testament we need to understand the times with knowledge of what we should do.”