Posted by Erik Jorgensen
On Friday, we met a guy who takes the long view. Bob Dickey was in Portland from Minnesota to speak at our club. Described by President Amy as “a legend in the investment community,” he is the technical strategist – the Chart Guy - at RBC, the Royal Bank of Canada. His work is to review trends in the market and to try to divine broad market directions for the benefit of his company’s network of 3000 investment advisors.
Two big questions underlie all of Bob’s work: what is the trend, and what is the sentiment? Bob spends most of his time reviewing headlines, reviewing market news, reviewing activity. While the general public thinks that the market could be on the brink of a decline, Bob thinks that the current bull market will continue, and bases this on his study of trends since the Great Depression. He believes that based on historical trends, the markets will be rising into 2020, mostly as the result of strong earnings. He also noted that if most people think the market will decline, it won’t, and that a market pullback is more likely to happen when people are not expecting it. When everyone is really sure the market is headed up, watch out.
As growth continues for the long term, people get overconfident at the end of the bull market cycle. Buildup leads to euphoria, then bubbles form, and then they pop.
He pointed out that in the short-term, markets have tended to rise and then go sideways, not doing much, before rising again. Over the course of a decade, a market might spend five years rising and five years in a flat position. Declines, sometimes sharp ones, do occur, but they tend to be offset as overall trends tend to be upwards. This same pattern of rise, then flat, then rising again is repeated on a macro level, with a cycle that might last 35 years - half of that rising steadily, and half of that characterized by flat or uncertain times. Of course if you have a very short window and need to get out of the market at a particular time, the consequences of these oscillations can be severe. But if you have time, he advises that you sit tight and things will recover, as they have done since the Great Recession.
He believes the market will quadruple in another decade. He expects 12 percent on average, which is a little better than the historical average. He sees this increase as being driven by sectors, including Health Care and Emerging Markets. He pointed out that the trends are fairly hard to deny: markets are up 52% of the days. In 95 years, 74% of the years are up year over year. People remember the very bad times, but there is a lot of growth between those. 
You’ll have to tune in in 2029 to see if he is correct, but if past trends continue to hold, there appears to be a good chance that he will be.
(Photo L-R: Bob Dickey and President Amy Chipman.)