I plotted 10 year of returns after monthly trend reverses from bear market to bull market in #SPX since inception of the data, this normally happens at major dislocations and massive long term bottoms in the stock market where sentiment resets and things turn around for a long time to follow, this signal popped in June 2023, quarterly trend turned bullish by end of Q4 2023.
Returns after 10 years were:
159.51% gain (cyan)
146.61% gain (yellow)
36.23% gain (white)
111.76 gain (black)
155.14% gain (blue)
96.33% gain (purple)
22.31% gain (green)
68.53% gain (pink)
111.26% gain (orange)
76.57% gain (brown) (2016 till today, not 10 year sample but helps to be aware of it)
Positive 100% of the time in that time window, with only 4 cases out of 10 where it goes temporarily in loss before the 10 years pass.
Drawdowns for those 40% of the time situations are:
96.33% gain (purple) with 13.93% max dd
22.31% gain (green) with 37.68% max dd
68.53% gain (pink) 29.30% max dd
76.57% gain (brown) with 4.57% max dd
So, in short: 60% odds of never going in loss from entry for these signals...within 10 years and roughly able to double your money in 10 years in #SPX.
Avg max dd in the 40% of cases where it goes in loss briefly: 21.37%, median drawdown: 21.12%
Do with this info as you will, you don't need to invest in
SPY
naturally, but this is a great long term compass and tool to have an idea of what to expect on average from here onwards in the long term.
Best of luck!
Cheers,
Ivan Labrie.
Returns after 10 years were:
159.51% gain (cyan)
146.61% gain (yellow)
36.23% gain (white)
111.76 gain (black)
155.14% gain (blue)
96.33% gain (purple)
22.31% gain (green)
68.53% gain (pink)
111.26% gain (orange)
76.57% gain (brown) (2016 till today, not 10 year sample but helps to be aware of it)
Positive 100% of the time in that time window, with only 4 cases out of 10 where it goes temporarily in loss before the 10 years pass.
Drawdowns for those 40% of the time situations are:
96.33% gain (purple) with 13.93% max dd
22.31% gain (green) with 37.68% max dd
68.53% gain (pink) 29.30% max dd
76.57% gain (brown) with 4.57% max dd
So, in short: 60% odds of never going in loss from entry for these signals...within 10 years and roughly able to double your money in 10 years in #SPX.
Avg max dd in the 40% of cases where it goes in loss briefly: 21.37%, median drawdown: 21.12%
Do with this info as you will, you don't need to invest in
SPY
naturally, but this is a great long term compass and tool to have an idea of what to expect on average from here onwards in the long term. Best of luck!
Cheers,
Ivan Labrie.
Comment:
Another long term scenario worth considering here is that market dynamics look very similar in many ways to the year 1989-1990, if you consider that the COVID crash was analogous to the 1987 market crash...this theory was developed by @timwest here, in his Key Hidden Levels chatroom and I tend to agree now, for the most part...
I'm seeing many parallels like how India (and other beneficiaries of near-shoring) are acting like an analogue to China after 1989 and specially after the Berlin wall fell, when globalization ramped up.
Now we see the opposite trend but that will benefit other countries as global supply chains shift towards them.
Even Argentina, locally, is showing many variables that make it resemble it's post 1987 period, since the COVID crash, the government of Alfonsín is very similar to the government of Alberto Fernandez, and the hyperinflationary destruction it sowed, planted the seeds for the massive growth of the 90s, since Carlos Menem took office in 1989 and conquered inflation, and practically dollarized the economy, which Javier Milei set out to do now.
I'm seeing many parallels like how India (and other beneficiaries of near-shoring) are acting like an analogue to China after 1989 and specially after the Berlin wall fell, when globalization ramped up.
Now we see the opposite trend but that will benefit other countries as global supply chains shift towards them.
Even Argentina, locally, is showing many variables that make it resemble it's post 1987 period, since the COVID crash, the government of Alfonsín is very similar to the government of Alberto Fernandez, and the hyperinflationary destruction it sowed, planted the seeds for the massive growth of the 90s, since Carlos Menem took office in 1989 and conquered inflation, and practically dollarized the economy, which Javier Milei set out to do now.
So, the setup is roughly like this: 4.61:1 rr with 60% odds in 10 years.
Sounds extremely good to me and you know how much risk you have in the few cases where this goes in loss temporarily...
Say you can tolerate to have a 1% drawdown vs net worth, you invest 4.67% (from June's closing price, would be a bit less now since the market is higher now)
In general, you can stomach up to 50% in such long term positions and should be able to tolerate it, as your position size is based on your current net worth, which might be larger over time as you add to your investment account from 10-20% of wages if you're working (or 10-20% of your returns from other investments or companies you may own).
Overall it makes sense to invest since June, was clearer since Q4 2023, and is even better on a retracement from here (which might or might not happen).
Cheers!