Trevor Greetham: Keeping powder dry for the better year ahead

GREETHAM'S GOSPEL

Recessions are, thankfully for investors, uncommon events, and economic expansions lasting five years or more are the norm.

However, superimposed on these full economic cycles are mini-cycles driven by the over- and underproduction of manufactured goods, and one of these cycles appears to be peaking. Global inventory cycles last about two years peak to peak and these cycles explain why even numbered calendar years have been so bad for equity investors over the last decade or so. The pattern is striking. Since January 1998, global equities have returned 60% in dollar terms. However, the cumulative return over the even numbered years (coinciding with inventory gluts) was a drop of 35%. Odd numbered calendar ...