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The End of an Era



This research paper is about the (slow) end of the most spectacular bull market in history.


Don't get me wrong, we are still in a very strong EQ bull market. However, I am afraid that such bull market is likely going to end in a FOMO/climax dynamic, similar to the climax we saw in bonds in March '20, setting up an unforgiving bull trap for millions of market participants.


NOW is the time to start thinking about the next macro cycle and a more active and diversified approach to investing.



This research paper highlights pretty well our POV for the decades to come, which could basically be lost decades for EQ passive investors. That would trigger a pretty huge crisis for pension funds and future retirees who won't have enough savings to (ever) retire.



ABSTRACT

"I show that the decline in interest rates and corporate tax rates over the past three decades accounts for the majority of the period’s exceptional stock market performance. Lower interest expenses and corporate tax rates mechanically explain over 40 percent of the real growth in corporate profits

from 1989 to 2019. In addition, the decline in risk-free rates alone accounts for all of the expansion in price-to-earnings multiples. I argue, however, that the boost to profits and valuations from ever declining interest and corporate tax rates is unlikely to continue, indicating significantly lower profit growth and stock returns in the future."




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