Capitalogix

The Benner Cycle: How Not To Predict Markets

When I first became interested in trading, I would often consult many traditional sources and old-school market wisdom.  I particularly liked the Stock Trader's Almanac. 

While there is real wisdom in some of those sources, most might as well be horoscopes or Nostradamus-level predictions.  Throw enough darts, and one of them might hit the bullseye. 

Still, it seems better than using astrology to trade. 

Want something easy to predict?  Traders love patterns ... from the simple head-and-shoulders to Fibonacci sequences and the Elliot Wave Theory.

Here's an example from Samuel Benner, an Ohio farmer, in 1875.  That year, he released a book titled "Benners Prophecies: Future Ups and Downs in Prices," and in it, he shared a now relatively famous chart called the Benner Cycle.  Some claim that it's been accurately predicting the ups and downs of the market for over 100 years.  Let's check it out. 

 

 

Here's what it does get right ... markets go up, and then they go down ... and that cycle continues.  Consequently, if you want to make money, you should buy low and sell high ... It's hard to call that a competitive advantage.

Mostly, you're looking at vague predictions with +/- 2-year error bars on a 10-year cycle. 

However, it was close to the dot-com bust and the 2008 crash, so even if you sold a little early, you'd have been reasonably happy with your decision to follow the cycle.

The truth is that we use cycle analysis in our live trading models.  However, it is a lot more rigorous and scientific than the Benner Cycle.  The trick is figuring out what to focus on—and what to ignore. 

Just as humans are good at seeing patterns where there are none ... they tend to see cycles that aren't anything but coincidences. 

This is a reminder that just because an AI chat service recommends something, it doesn't make it a good recommendation.  Those models do some things well.  Making scientific or mathematically rigorous market predictions probably isn't the area to trust ChatGPT or one of its rivals ... yet. 

We're seeing bots improve at running businesses and writing code, but off-the-shelf tools like ChatGPT are still known for generating hallucinations and overconfidence. 

Be careful out there.

Here Are Some Links For Your Weekly Reading - July 6th, 2025

Here are some of the posts that caught my eye recently. Hope you find something interesting.

Lighter Links:

• AI and Drones are Taking Over July 4th Fireworks. (Quartz)
• The Next Kodak Moment is Coming. (ThierryVonArvy)
• Jonny Ive is Going to Deliver Another IPod Moment – And OpenAI Knows It. (CreativeBloq)
• Scientists Say They Can Predict How Long You'll Live From a Single MRI. (BestLife)
• 10 in 10: The Tech that Will Rewrite Humanity. The Post-Human Decade Starts Now. (BoxOfAmazing)

 

Trading Links:

• The First Big Winners in the Race to Create AI Superintelligence: The Humans Getting Multi-Million Dollar Pay Packages. (Finance)
• Why Markets Peak When Everyone’s Optimistic. (PretzelLogic)
• A New Crypto Frontier is Emerging on Wall Street, Beyond Bitcoin and Ether. But Here Are the Risks. (MarketWatch)
• How Zoom Took Over the World. (Crunchbase)
• The CEO of One of the Largest Office Maintenance Firms in America Says Employers Are Changing Their Workspaces in 4 Key Ways. (Fortune)

 

Here are some of the posts that caught my eye recently. Hope you find something interesting.

Lighter Links:

• AI and Drones are Taking Over July 4th Fireworks. (Quartz)
• The Next Kodak Moment is Coming. (ThierryVonArvy)
• Jonny Ive is Going to Deliver Another IPod Moment – And OpenAI Knows It. (CreativeBloq)
• Scientists Say They Can Predict How Long You'll Live From a Single MRI. (BestLife)
• 10 in 10: The Tech that Will Rewrite Humanity. The Post-Human Decade Starts Now. (BoxOfAmazing)

 

Trading Links:

• The First Big Winners in the Race to Create AI Superintelligence: The Humans Getting Multi-Million Dollar Pay Packages. (Finance)
• Why Markets Peak When Everyone’s Optimistic. (PretzelLogic)
• A New Crypto Frontier is Emerging on Wall Street, Beyond Bitcoin and Ether. But Here Are the Risks. (MarketWatch)
• How Zoom Took Over the World. (Crunchbase)
• The CEO of One of the Largest Office Maintenance Firms in America Says Employers Are Changing Their Workspaces in 4 Key Ways. (Fortune)

Market Growth in the First Half of 2025.

According to S&P Global, the U.S. market cap rose by 4.7% in the past 6th months. This represents a modest gain compared to the average market capitalization growth of 12.2% during the same period.

Leaders in growth were South Korea, Spain, Germany, Italy, and Brazil.

 

via VisualCapitalist

We have previously discussed this, but in addition to investments in technology and artificial intelligence, global capital is also being directed toward emerging markets, where many businesses are being established.

At first glance, some may see U.S. underperformance, but it can also be read as a sign of relative maturity and stability. Another potential perspective is that U.S. companies have already experienced explosive growth in recent years, particularly in sectors such as tech and AI, suggesting the market may currently be in a phase of consolidation.

While it's always great to see explosive growth, people undervalue resilience and steady growth, especially in light of the volatile first quarter of the year. 

Time will tell!