This week I’d like to coddiwomple through the history of Fundamental Gravities here in the U.S. and what that history tells us about the first three months of 2019, writes Landon Whaley Wednesday.He's presenting at MoneyShow Orlando Feb. 9.

As we close the books on another year, I think it’s a fine time for a history lesson. Don’t worry, this isn’t going to be like your college freshman History 101 class with Professor McStuffins; this is a history of the U.S. Fundamental Gravity. If you need an FG refresher course before moving forward, refer to pages 14-15 in any Gravitational Edge, or click here.

Since Q1 1990, the U.S. has had 115 quarters of economic activity. Over those 115 quarters, the U.S. has spent 31 (27%) quarters in an FG1 environment, 25 (22%) in an FG2, 35 (30%) in an FG3, and 24 quarters in an FG4 environment (21%).

So, historically speaking, the U.S. economy has spent its time roughly evenly split between periods of accelerating growth and regimes of slowing growth.

But those are averages, and we know that gleaning insight from averages can be ineffective and downright misleading. So, let’s hone in to look at this Fundamental Gravity history on a decade-by-decade basis.

During the 40 quarters of the 1990s, the FG breakdown was: 22 (55%) quarters in an FG1/2, 11 (28%) in an FG3, and (7) 18% in an FG4 environment. During this decade, accelerating growth was more prevalent, and the instances of FG4 environments were well below the average number of occurrences we’ve seen over the full 28 years.

During the 40 quarters of the 2000s, the FG breakdown is as follows: 15 (38%) quarters in an FG1/2, 13 (33%) in an FG3, and 12 (30%) in an FG4. During this decade, growth-slowing regimes had the upper hand, and FG4 environments in particular occurred at a rate well above their long-run average. This FG4 deviation from the norm makes sense given the two recessions that occurred during the decade.

This brings us to the current decade of the 2010s. Over the 35 quarters so far, the FG breakdown is as follows: 19 (54%) quarters in an FG1/2, 11 (31%) in an FG3, and 5 (14%) in an FG4. With five quarters left in this decade, the FG statistics are eerily similar to the 1990s. Whether this means the 2020 decade will mirror the growth-slowing dominance of the 2000s is anyone’s guess and not the point here today.

Rather, the point is this: We’ve had such a bullish run over recent years that not one U.S.-centric investor, professional or individual who began trading in the last decade has experienced a market “dip” that wasn’t immediately bought, much less a year of bad performance or, God forbid, an outright bear market. These folks, and their processes for managing markets, have only experienced one of the most favorable economic environments we’ve ever seen.

I’ve been professionally managing money for almost two decades, and the investing framework I use today started to be formed during the 2000 equity market meltdown and the ensuing 2001 recession. My framework was further developed and successfully stress-tested during the crux of the Financial Crisis in late 2008 and the ensuing rebound in 2009. Most importantly, because of my global macro focus, that framework has been tested over the last decade as I traded all four major asset classes in the midst of FG4 environments and crashing markets across two dozen economies.

People who’ve entered the market in the past 10 years don’t know how to properly trade and risk manage growth-slowing regimes, much less a Fundamental Gravity #4 environment characterized by both growth and inflation slowing together.

This statement is fairly evident given:
1. The horrific performance of most money managers over the last three months.

2. All the blame-throwing being done by the Old Institution explaining why markets are in an upheaval.
3. The sheer number of retail investors who’ve likely stopped opening their Old Institution wealth management account statements for fear of how far their net worth has fallen in the last month.

If you didn’t know it before Q4 began, nothing alters the risk and return landscape like an FG4 environment. The New Year begins for trading today, so gear up because we’re getting ready to follow up the FG4-in-Q4 with an FG4-in-Q1.

Please click here and sign up if you’d like to receive the latest edition our research reports as well as to participate in a four-week free trial of our research offering, which consists of three reports: Gravitational Edge, The 358 and The Weekender.

Watch Landon Whaley’s 3 Ideas for Investing and the meaning of coddiwomple in a short video here.
Recorded: MoneyShow Dallas Oct. 5, 2018.
Duration: 6:42.

Watch Landon Whaley discuss When Markets Cycle  in a short video here.
Landon Whaley: We have a generation of investors and asset managers who know only one market. The reality is markets and economies cycle and catch people off guard.
Recorded: MoneyShow Dallas Oct. 5, 2018.
Duration: 5:51.

Landon Whaley interviews Adrian Manz: How I approach stocks here.
Recorded: MoneyShow Dallas Oct. 5, 2018.
Duration: 7:48.

Landon Whaley interviews trader Jackie Ann Patterson: How I got started trading and how I approach it with my Truth about ETF Rotation here.
Recorded: MoneyShow Dallas Oct. 5, 2018.
Duration: 6:14.

Landon Whaley interviews John Carter: How I started trading here.
Recorded: MoneyShow Dallas Oct. 5, 2018.
Duration: 5:37.