According to the length of the cycle, economic cycle theory can be divided into:
(1) Short cycle: an economic cycle lasting 3-4 years proposed by British economist Kitchin.
(2) Medium cycle: an economic cycle of 9 to 10 years proposed by French economist Juglar.
(3) The long cycle is an economic cycle of 50 to 60 years proposed by Kondratiev.
(4) Construction cycle: an economic cycle of about 20 years proposed by American economist Kunez.
Short cycle
Kitchin cycle
An economic cycle lasting 3-4 years proposed by British economist Kitchin in 1923.
The Kitchin cycle is also called the inventory cycle. Based on statistical data on interest rates, prices, production and employment in the United States and the United Kingdom from 1890 to 1922, Kitchin started from the phenomenon that when manufacturers produce too much, inventory will be formed, thereby reducing production. He called this short-term adjustment of 2 to 4 years the "inventory" cycle. This short cycle was discovered when there were regular ups and down fluctuations in 40 months.
Mid-term
Juglar cycle
An economic cycle lasting about 10 years was proposed by French economist Juglar in 1860. The cycle is divided based on the fluctuations of national income, unemployment rate, and production, profits and prices in most economic sectors.
It is generally believed that three Kitchin cycles constitute a Juglar cycle.
Juglar believed that the existence of crisis or panic is not an independent phenomenon, but one of the three stages of social and economic movement, which are prosperity, crisis and depression. The recurrence of the three stages forms a cyclical phenomenon.
He pointed out that crises, like epidemics, are a social phenomenon in developed industry and commerce. To a certain extent, such cyclical fluctuations can be foreseen or mitigated by taking certain measures, but they cannot be completely suppressed. He believed that factors such as politics, war, agricultural failures, and climate deterioration were not the main causes of cyclical fluctuations, but only aggravated the trend of economic deterioration. Cyclic fluctuations are automatic phenomena in the economy, which are directly related to people's behavior, savings habits, and the way they use available capital and credit.
How to guide investment?
The Juglar cycle is generally seen from the proportion of equipment investment to GDP. By comparing the nominal proportion of equipment investment to GDP and the leading index of investment income two years later (investment income refers to the profit rate before interest on total capital, which is simply the rate of return of the enterprise minus the interest rate of interest-bearing debt or financial costs), it can be seen that the trend of investment income indicates the proportion of equipment investment to GDP.
Many people believe that the Juglar cycle is highly consistent with the Chinese stock market. The 998 points in 2005 is definitely an important node. Counting back from this node, 9.5 years is exactly 512 points in January 1996. Since the lowest point of the Shenzhen Component Index occurred in that month, although the lowest point of the Shanghai Composite Index occurred in July 1994, it was only a two-month pulse market. The real bull market started in January 1996. Therefore, January 1996 is also an important node. The two nodes span 113 months, which is exactly 9 and a half years of the Juglar cycle.
The bull market that lasted for nine years from 2005 to the second half of 2014 was also a Juglar cycle.
Long cycle
Kondratieff Cycle
It is an economic cycle lasting 50-60 years proposed by Russian economist Kondratiev in 1926. Kondratiev's long wave theory is the abbreviation of Kondratiev's long wave cycle theory.
The core idea of the Kondratieff wave is that the world's resource commodities and financial markets will fluctuate in a 50-60 year cycle. There are four small waves in one big wave: prosperity, recession, depression, and recovery, which is the theoretical basis of the Merrill Lynch clock. Another way to divide it can be further divided into nine small waves: recovery, expansion, overheating, explosion, peaking and falling, rebound, decline, collapse, and bottoming. Each Kondratieff wave refers to a relatively long period of total price increase or total price decrease. Long-term price fluctuations are not generated by themselves, but are the result of the nature of the capitalist system.
What stage of the Kondratieff cycle are we in now?
Most long wave theorists believe that there have been five long waves since the Industrial Revolution, and the sixth long wave is about to unfold. These five long waves are:
Industrial Revolution (1771)
Steam Engine and the Railway Age (1829)
The Age of Steel, Electricity, and Heavy Engineering (1875)
Information and Communication Age (1970s)
Currently, the world is at the turning point of the fifth long wave
Recently, many institutions have begun to study the Kondratieff theory. According to some opinions, the peak of the Kondratieff boom that dominated the US prosperity was the peak of the Kondratieff boom, that is, 2000 or 2004. After 2004, the Kondratieff has confirmed the transition from prosperity to recession. What can be confirmed now is that 2008 was the peak of the global economy. Assuming that 2008 was the last year of the rising period, then 20 years ago was 1988. In the 1970s and 1980s, the US encountered an oil crisis and the economy declined, which led to the collapse of the Bretton Woods system. However, after entering the 1990s, the US economy began to recover and led the 20 years of the Internet digital revolution. Going back 5 years, 2008-2013 was indeed a difficult five years for the world. All countries were desperately releasing money. Now the US has survived the first wave of decline and the economy has shown signs of recovery. From the comparison between before and after, it makes sense to judge that now is the end of the first decline period after the peak.
50 to 60 years means that most people can only catch one Kondratieff wave in their lifetime. The cycle you are born in and the choices you make will determine your life.
In fact, this is the truth of life. There are always some things that we cannot change, which determine the direction of other things. Therefore, people must first understand themselves. The premise of prediction is to have a clear understanding of the present. It is just that with the help of the Kondratieff cycle, you will live more easily, and it will be easier for you to climb up from the current class.
How to guide investment?
If the above inference is true, the world will enter a period of rising prices and falling incomes in the future. Since the end of last year, the rebound of bulk commodities may be due to the demand for inventory replenishment rather than the actual warming of the downstream. For example, iron ore led to the rise of rebar rather than rebar leading to the rise of iron ore. If the bulk commodity can still start a bull market throughout the year after the inventory replenishment, then we should pay attention to the Kondratieff wave. Perhaps a wave of inflation is on the way.
Building cycle
Kunets cycle
It is an economic cycle proposed by American economist Kuznets in 1930, which lasts for 15-25 years, with an average length of about 20 years. Since this cycle is mainly divided by the cyclical fluctuation phenomenon of the prosperity and decline of the construction industry, it is also called the "construction cycle". After the global real estate commercialization degree increases, the real estate industry has a greater impact on the Kuznets cycle.
How to guide investment?
China's data chain is not long enough to provide substantial evidence to support the Kuznets cycle, but if we count from 1998 when welfare housing distribution was stopped, to 2014 when real estate showed signs of peaking, it is almost 15 years. But it should be noted that the process and form of peaking may be varied, and the time is difficult to predict. There are also many interfering factors in the middle, such as destocking.
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