Why Long-Term Super Cycles Matter to Investors

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When it comes to deciding their next investment move in the short-term, investors typically focus on hot-button issues of the moment such as the inflection points, interest rates and growth, according to Peter Oppenheimer, Goldman Sachs Research’s chief global equity strategist, and they tend to forget what’s really important: The long-term drivers in policy, economic activity, geopolitics, politics and social attitudes.

“All of these things can have a meaningful effect over the long run on the kinds of returns available to investors,” he said on Goldman Sachs Exchanges podcast.

Oppenheimer believes it’s important for investors to see how the world around us is changing and what impact that could have on longer-term investment opportunities.

Getting those longer-term trends right and positioning for them can really enhance returns, Oppenheimer added. In his latest book, Any Happy Returns, Oppenheimer explained why investors should focus on super cycles.

What are super cycles?

The economy is cyclical in nature with periods of boom and bust. Oppenheimer noted that although cycles do repeat themselves under different circumstances, they tend to do so under long-term structural changing environments. Some of them are extremely supportive for economic growth, prosperity and returns, while others are much more challenging.

There have been four secular bull markets since 1900 and four 'Fat and Flat' periods

S&P 500 real price return

Source: Goldman Sachs Investment Research

When looking at the long-term cycles, from 1900, there have been four “Fat and Flat” cycles for equities, during which cycles oscillate around relatively flat returns. Then came four secular bull markets, in which cycles continue to operate but within an upward-trending trajectory.

But it’s the even longer-term cycles – called super cycles – that’s important for investors to consider.

Super cycles are economic and financial cycles that run much longer than the usual cycle of economic activity. They are typically characterized by prolonged periods of strong economic growth, often accompanied by increased GDP, high demand for goods and services which could lead to price increases and high employment.

Super cycles are also marked by fundamental changes to existing economic structures; these changes may include the introduction of new industries or technology as well as structural changes to demand.

Bearing this in mind, Oppenheimer found five major super cycles has occurred between the end of World War II and 2020, and they tend to have a dominant impact on investor returns.

This article is for informational purposes only and is not a substitute for individualized professional advice. Articles on this website were commissioned and approved by Marcus by Goldman Sachs®, but may not reflect the institutional opinions of The Goldman Sachs Group, Inc., Goldman Sachs Bank USA, Goldman Sachs & Co. LLC or any of their affiliates, subsidiaries or divisions.