This, of course, implies that the stock market peak last year marked the beginning of the long-term bear market forecast in my book Stock Cycles . Harry S. Dent developed the concept of the spending wave in his 1993 book The Great Boom Ahead . Dent proposed that economic boom and bust times are determined by demographic factors.
Individual spending tends to peak in the mid-forties.
Thus, aggregate spending should correlate with the size of the mid-forties population. If we plot the estimated size of the mid-forties age cohort with year we obtain a generally rising trend that shows a number of peaks and troughs due to past variations in birth and immigration rates. For example fewer babies were born during the Great Depression than either before or afterward. Dent proposes that economic boom times are associated with increasing size of the mid-forties population and that bust times are associated with a decreasing size of this population. In The Great Boom Ahead , Dent presents a graph that shows a close correlation between the Standard and Poor 500 index in constant dollars and the birth rate 44-46 years in the past.