Thread by @TimmerFidelity

Let’s revisit secular trends, looking at the secular bull markets of 1949-1968 & 1982-2000. We’re at the point where the long-term momentum of #stocks vs #commodities has peaked in the past. This chart shows a lot of cyclicality when it comes to financial vs real assets. 1/THREAD

During the 1949-1968 cycle, growth peaked against value right about now (in terms of the 10-year CAGR), while during the 1982-2000 cycle the 10-year CAGR flattened for a few years before spiking into what became the dot-com bubble in 1999-2000. 2/

So is this the 1960s or the 1990s? Given that we have already experienced a parabolic out-performance phase for large-cap growth, I like the 1949-1968 analog here, in which case we are somewhere in the early 1960’s. 3/

One important distinction between the 1960’s &1990’s: The 1960’s produced a secular upturn in inflation, while the 1990’s saw no such inflection point. The growth/value trade likely depends on an upturn in #inflation from here. 4/

Here, the 10-year #inflation rate during these secular regimes. A pretty binary set of outcomes. 5/

And here, the same #inflation analog but with the 5-year stocks/bonds correlation overlaid. I measure the correlation between equity returns & changes in real bond yields. 6/

Implications? If #inflation starts to structurally rise from here—a big if—in all likelihood it will flip the correlation around, from positive (#stocks and yields up) to negative (stocks up, yields down). That’s what happened in the early-to-mid 1960s. 7/END