The S&P Will Double Within The Next 5 Years

You read that title right.

The S&P will double.

And not just eventually. But over the next 5 years (or sooner).

Sounds like a Herculean task on the surface, but it's really not.

In fact, the market only needs to gain on average of 14.9% per year in order to do so. That's not such a stretch given the market has been averaging 14.9% per year since this bull market began in early 2009, even though GDP (prior to last year) has only been increasing at an anemic 1.48% annual rate.

My 5 year doubling thesis also means that we won't see another recession until stocks double again, nor will we see another bear market until stocks double again.

Got it?

Now let me tell you why. And how to trade it.

Boom and Bust Cycle

We are all familiar with the typical 5 year boom and bust cycle of economic expansion and contraction.

In the past, following a recession, the economy would grow by over 3-4% annual GDP, and a new bull market would begin. As the recovery would take hold, gains would accelerate, and excesses would get built up in the economy.

With that, inflation would rise, thereby prompting the Fed into a series of interest rate hikes to cool things down.

Ultimately, the economy would slow, then fall into contraction, and a recession (along with a bear market) would ensue.

Excesses are wrung out, inflation subsides, and the economy is eventually reset.

Growth reemerges, and the whole boom and bust cycle repeats itself once again.

Things Changed After the Recession of 2007-2009

When the economic recovery (and stock market recovery) began in March of 2009, GDP grew at an abnormally slower pace.

This prompted the now famous 'new normal' line that characterized this post-recession recovery.

Hearing this, I hypothesized that the traditional 5 year boom and bust cycle would be replaced with something far different.

Since we were growing at a significantly slower pace, I concluded that the 'boom' cycle would be elongated to 7-10 years, while the following 'bust' cycle would be shallower in depth and shorter in duration, given that there would be fewer excesses or inflation to wring out.

And I think this theory has played out perfectly so far.

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Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this ...

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