Congratulations on the day of America's longest economic expansion ever. June marked 10 years of growth, and matched 1991–2001 as the longest expansion in US history. And the good news continues. The number of third quarters will set new records.
But rather than partying, most understandable eulogies prepare. This extension is too old, they worry. Error! Economic cycles do not die from old age. The more people fear that myth, the more I want to party.
Whatever finally kills this 120-month upswing, it won't be the fact that it's more than twice the 58-month average for US expansions since World War II. To understand this, think globally.
Australia ended the 27th year with uninterrupted growth in 2018. It's still strong. The United Kingdom grew from 1992 to 2008 – a 16 year stretch. One was, of course, dressed in the financial crisis of 2008-09.
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So , whose age did not kill these longer extensions, why should it judge the US now?
People think of many phenomena that they do about biological life, where relative old age in any species eventually kills – technically called senescence. Senecence is of no importance to the economies. Expansions die due to negative trillion dollar bills. Historically, central banks, such as the Federal Reserve, were often the culprit. They often misfed the tea leaves, feared an overheated reality and constantly tightened while the economy weakened. Although I do not believe that interest rate cuts are needed now, the central banks globally are starting to cut, they do not fear overheating now.
Nor should they. This expansion has average GDP growth in the low 2% annual area. Slow! The average after the war after 2009 was 3.3% including recessions. Until August, wage growth of 3% year over year hit just one month throughout the cycle. Fed data show that only high school workers (or less) did worse, and wages fell 4.2% in total from 2007 to 2013. They did not reach the pre-recession level before 2017. Almost any financial calculation you are investigating –Inflation, growth in loans and money supply, industrial production, consumer spending – shows slow growth.
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The reason? The Federal Reserve and the early long execution of "quantitative relief" – to buy the erroneously called "stimulus." Why? That the bond purchase lowered the long-term interest rates. Fed officials thought it would be for keen borrowers. But the banks must deliver these loans. The banks finance long-term lending by borrowing at short-term interest rates. Therefore, it is the spread between short and long-term interest rates – the infamous spread "yield curve" – a power of attorney for the profitability of new lending. Fed's lowering of long-term interest rates when short-term interest rates were close to zero squeezed the profitability of lending. So banks lent abominable. Companies struggled to get credit. The amount of money did not grow and kept inflation low and economic growth contracted. Fed's quantitative quaalude made an economic "boom" for a low, long, gleaming rag against growth.
This longest, slowest expansion has another recognition: the most hated of history. Understanders have consistently distributed the growth. Early on, it was normal skepticism, people who feared a depression, double-deep or Japanese style. That fear never disappeared completely. Every weak growth decline – typical variations within any economic cycle – gives rise to fears of recession today. See current concerns to slow down production data. Pundits claim this faltering old economic boom dies for their eyes.
As I have described in detail, other people's fears are your friend. They keep the euphoria in check and lower expectations. It makes a positive surprise easier to achieve and stocks. It also explains why history's longest beef market runs parallel to this long, gleaming expansion – two long, slow ascents. Stocks with a 16% annual return this time lagged the 21% historic average of the beef markets.
Forget about the fear of age that kills this expansion. As long as people hate the growing US economy, stocks have room to climb.
Ken Fisher is the founder and executive chairman of Fisher Investments, author of 11 books, four of which were the New York Times bestsellers, and is No. 200 on the Forbes 400 list of richest Americans. Follow him on Twitter: @KennethLFisher
The views and opinions of this column are the author's and do not necessarily reflect the US TODAY.