Economic and market phenomena occur in cycles.
The basic business cycle can be loosely defined a series of economic expansions and contractions.
But how long are these cycles and how can they be applied?
We compiled eight “cycle” theories that tell us varying things about where markets and the economy are going.
Some have been around for decades, others are fairly new.
One is even based on sun spots.
The Kondratiev Cycle
Creator: Nikolai Kondratiev (1892-1938)
Duration: 50-60 years
Theory: Economic growth in capitalist countries comes in long waves and are determined by technological innovations.
What it predicts: Prices, interest rates, foreign trade, coal, pig iron production
Where we are now: The Kondtratiev cycle indicates we’re in a blank period and at least 30 years away from the next economic expansion period.
The Schumpeter Cycle
Creator: Joseph Schumpeter (1883-1950)
Duration: 50-60 years
Theory: Shumpeter cycles actually revolve around periodic “clusters of innovation”
What it predicts: Global economic paradigms
Where we are now: Schumpeter’s cycle says we’re on the downswing from the most recent innovation cluster.
Source: Andrey V. Korotayev
The Kitchin Cycle
Creator: Joseph Kitchin (1861-1932)
Duration: 40 months
Theory: The market gets ‘flooded’ with commodities as growth accelerates. When demand declines, prices drop and the produced commodities get accumulated in inventories. But there is a delay between this and when entrepreneurs must reduce output.
What it predicts: Demand, prices, output
Where we are now: The Kitchin cycle indicates prices are in an upswing period, according toTimingSolution.com.
The Juglar Cycle
Creator: Clément Juglar (1819-1905)
Duration: 7-11 years
Theory: In addition to Kitchin’s lagging inventory signal, there is an additional lagging fixed investment signal.
What it predicts: Capital investment levels
Where we are now: The Juglar cycle says we’re at the beginning of an upswing in capital investment, according to TimingSolution.com.
The Kuznets Cycle
Creator: Simon Kuznets (1901-1985)
Duration: 15-25 years
Theory: As a country develops, there is a market-driven cycle that at first increases inequality, and then decreases it after a certain average income is attained.
What it predicts: Income
Where we are now: The Kuznets cycle indicates that given current high income inequality, the U.S. should be at a new stage of development
The 17.6 Year Cycle
The Lehman Wave
Creator: Robert Peels, Maximiliano Udenio et. al
Duration: 12-18 months
Theory: During periods of market instability, sales drop substantially more with companies upstream in the supply chain.
What it predicts: Sales
Where we are now: The Lehman wave says market volatility has dampened but is still a factor for companies’ sales figures.
The Jevons Cycle