How the Benner Cycle Predicts Stock Market Cycles With Shocking Accuracy

Markets are unpredictable – you would have heard this phrase countless times. But is this really true?

People from all fields of life – scholars, mathematician, artists, scientists and more have tried to figure out the direction of the market for years. In the era of quant trading and data science, some studies and strategies of the past have built their own following. One of these popular study is Benner Cycle.

Let’s learn a bit about Mr. Benner.

Benner Cycle has been made by Samuel Benner. Being a farmer from the 1800s, he got interest in stock markets and wanted to understand how market cycles worked. In 1875, Mr. Benner published a book that forecasted business and commodity prices. After study, he identified periods of panic, good times, and hard times.

But before we learn about Benner cycle, let’s understand a few foundational concepts related to it.

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Panic Years

Those years, when the market panicked, either buying or selling a stock irrationally until its price skyrocketed or corrected beyond anyone’s wildest expectations.

Good Times

Years that Mr. Benner identified as times of high prices and the best time to sell stocks, values, and all types of assets were classified as good times.

Hard Times

In these years, Mr. Benner recommended buying stocks, goods, and assets and holding them until the “boom” years of good times, then sell it off.

Strategy

As per Benner cycle, one buys assets in hard times and sells in good time.

Being a farmer, Mr. Benner had a deep understanding of seasonal cycles for crops. With this information he could gauge supply and demand, and ultimately decode the price trend. When Mr. Benner looked deeper into these cycles he found an 11-year cycle in corn and pig prices with peaks every 5/6 years.

This matched the 11-year solar cycle. Mr. Benner ultimately concluded that this 11 year solar cycle affects crop yield, affecting revenue, supply/demand, and price.

Is the strategy effective?

While the accuracy of the strategy is not calculated precisely, the strategy was able to accurately show all the corrections and highs for the past few decades. However, this strategy validates one simple concept – Markets move in cycles. In around a decade markets complete a cycle, but overall the movement is upwards only.

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