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Long cycles and the asset markets

The essential

Kondratiev: father of the supercycle

  • The first “law” pertains to inventions: they take place about 20 years before actually being rolled out on a large scale
  • The second “law” concerns social movements, revolutions and wars: their frequency increases at cycle extremities
  • The third “law” refers to the overlapping of long and short cycles
  • The fourth “law” relates to deflation of agricultural prices during downward phases

Breakdown of major cycles into four phases: the example of the United States

  • Long cycle observations based on financial data
  • These “seasons” also reflect an economic reality
  • Clarifications on real interest rates, inflation, debt and equity valuations 

Major international cycles

  • We reviewed ten countries presenting basically very different features
  • Distinctive behavioural features of these countries

The demographic factor plays a key role

  • Population trends in the principal developed countries
  • Growth in the economically active population
  • Generational impact on the main asset classes
  • Productivity gains
  • Positioning of developed and emerging countries based
  • on these criteria

Consequences of ongoing transformation on geopolitics and our growth model

  • By sheer virtue of its size, China is destined for leadership
  • The size of the global capitalist economy is changing


Amundi Discussion Papers Series - May 2015






The objective of this Discussion Paper is to explain our long-term market analysis framework. It should be read prior to the paper we published in October 2014 entitled «The Short Investment Cycle: Our Roadmap.» In this paper the aim is to identify the current 10 to 20-year period so we can gain the most from the features of the various types of investments, whereas the interpretation of short cycles aims to refine this analysis to optimally seize available opportunities.

The 2008-2009 recession was the worst of its kind since World War II . Our generation had never known anything like it. Some went as far as to announce the end of capitalism as we know it. With a little hindsight, however, we can see that such generation gaps are the rule and not the exception.

All economic activity is enveloped within major long-term cycles lasting roughly 50 years. The dating of these cycles is not precise and varies depending on whether focus is placed on one or another of the variables taken into account, such as economic growth, inflation and debt. However, each observer of long economic cycles tends to agree - give or take a few years - on the beginnings and ends of the periods that bear similar characteristics and have succeeded one another since the dawn of the industrial age (i.e. in over two centuries of observation). Looking beyond purely economic aspects, we are more specifically interested in the behaviour of assets over the course of these periods. We chose to date these cycles by first observing the behaviour of assets and then incorporating economic data. We will thus be able to see how the economic cycle and the asset cycle match up over an extended period.

There have been four major cycles since the end of the 18th century. We will begin by describing the empirical evidence that Kondratiev brought to light on two and a half cycles and will show that these cycles have been repeated ever since. We will subsequently explain how each of these cycles can be broken down into four phases by examining the case of the United States, then show that this approach is not just American but can also be seen in the ten different countries that we studied. Next, we will turn to the demographic factor, which plays a key role in Amundi Discussion Papers S 4 eries - DP-10-2015 major cycles and raises some interesting prospects in order to gain a better grasp of the future. Finally, we will make a few comments on the consequences of the ongoing transformations on geopolitics and our growth model before summing up. This research, under way for some thirty years, contributes largely to our analysis of the markets and underpins the recurring analysis prepared for the meetings of the Investment Committee.

MIJOT Eric , Head of DM Strategy Research

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Long cycles and the asset markets
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