by Bob Stokes
Updated: December 20, 2016
War vs. peace and the stock market appear to be correlated. The evidence is compelling.
Let's go back to 1982, when EWI's Robert Prechter’s Elliott Wave Theorist called for a historic bull market in stocks. The October 2016 Theorist mentions that it also made another prediction. Here's a chart and commentary:
The October 1982 issue of The Elliott Wave Theorist [predicted] that there would be “No international war for at least ten years.” Most of the globe did enjoy peaceful times throughout the bull market that carried through 2000. The only significant skirmish involving the U.S. during that time was the Gulf War of 1991, which compatibly with socionomic causality followed the stock market’s Primary-degree correction of 1987-1990, as manifest clearly in the path of the Value Line indexes.
In the early 1980s, hardly anyone was forecasting a great bull market, much less the prospects of peace. And this is not an isolated example of socionomic prediction.
This October 2016 Theorist chart provides more food for thought:
The Theorist published the first version of the chart in February 1989, and its implications have held true over the quarter-century since then.
As you can see, the chart chronicles the wars that have followed bear markets going back to the Revolutionary War. It also notes the times of peace, which correlated with bull markets in stocks.
Honing in on what's occurred since the start of the century, the October 2016 Theorist adds:
The 9/11 attacks of 2001 occurred after eighteen months of decline in the S&P following its peak in March 2000. After two and a half years of increasingly negative social mood, on October 10, 2002, the very day of a multi-year low in the Dow Jones Industrial Average, the U.S. Congress passed a resolution to attack Iraq. The attack itself took place on March 19, 2003, just seven days after a multi-year low in the World Stock Index and the second low of a double bottom in the Dow.
Since 2011, the number of U.S. troops in the Middle East has dropped by 90%, as the U.S. stock market trended to new all-time highs. Yes, the U.S. is helping to fight ISIS, but so far, our involvement has been restrained. In our publications, we continue to assess the stock market’s long-term trend – and, by proxy, the prospects of war vs. peace over the next few years.Stay tuned.