In this article, I will tell you how the Benner Cycle has predicted market movements for more than 100 years. I wish you a pleasant reading...
How has the Benner Cycle accurately predicted market movement for 150 years?
As a farmer in the early 19th century, Samuel Benner wondered how market cycles in the economy worked. This curiosity led him to write a book called 'Trends and Phases of Business' in 1875. In the book, he explained the method he used to predict the future direction of business and commodity prices. Benner discovered that market movements repeat in a series of annual cycles and determined that these cycles include years of panic, years of good times, and years of hard times. For example, panic years are often years in which average economic activity is low, and asset prices fall while unemployment rates rise. The Benner Cycle also accurately predicted major economic events such as the Great Depression in 1929, the Dotcom Bubble in the 2000s, and the COVID crisis in 2020.
Now, these are the periods that Samuel Benner divided into three; Let's explain the Panic Years, Good Times and Hard Times in detail:
Panic Years: These are the years in which there is extreme volatility in stock prices due to market fluctuations. During these periods, investors influence the market by irrationally buying or selling stocks and pushing their prices up or down. During periods when the market is panicking, investors generally act with short-term goals and make decisions to buy or sell stocks based on the current state of the market. These decisions are often irrational due to extreme volatility in market conditions.
During these periods of panic, the price of a stock either falls to an incredibly low level or, conversely, rises unexpectedly. Therefore, investors need to be very careful while investing in these panic times. If they make the right decisions, they can make big profits. However, if they make wrong decisions, they may face serious losses.
Good Times: These are the years when high prices are observed and the best time to sell. During these times, investors can sell their stocks, securities and other assets at the best prices. Therefore, the years that Benner describes as "Good Times" are considered opportunity-filled times for investors. However, it should not be forgotten that these periods will not last long and then we will move on to other periods.
Hard Times: During these years, he recommends buying stocks, commodities, and assets and holding them until the "boom" years of good times, then selling them off.
A "Certain Thing" for 100+ Years
Under his card, pictured above, he wrote: "One thing is certain." by Samuel Benner's investment strategy has achieved near-perfect success for more than 100 years. For Benner, a successful Ohio farmer, the market panic of 1873 was a major blow and bankrupted him. While trying to understand why this situation occurred, Benner discovered the concept of market cycles.
As a farmer, Samuel knew that growing seasons affected crops, which in turn affected supply and demand, which was reflected in prices. Benner dug deeper into these cycles and discovered that there was an 11-year cycle in corn and hog prices, peaking every 5/6 years. This matched the 11-year solar cycle. Benner calculated that this solar cycle affects crop productivity, which in turn affects income, supply/demand, and prices.
The Benner cycle also uses a 27-year cycle in iron prices. In this cycle, lows occur every 11, 9 and 7 years, while peaks occur every 8, 9 and 10 years.
Studying market history helps you learn how these cycles affected price and how they still affect prices today. Currently, according to this analysis, we are in difficult times and a period where asset prices are falling, indicating that it is a good time to buy assets.
