The Metamorphosis Bull Market: From Taylor Swift and Shakira to NVIDIA and COINBASE
Much like the guiding light of the North Star for sailors, the stars of jazz, rock and roll, pop, Indie serve as beacons, indicating that a profound structural change is underway in our society.
A bull market refers to a financial market in which stock prices are rising or expected to rise over an extended period of time. We currently find ourselves amidst one of the most remarkable bull markets in history, a true testament to bullish sentiment. However, it is also the most polarized and criticized bull market to date. Dissatisfaction began to brew in 2013 with the 'taper tantrum', as concerns surfaced regarding the withdrawal of monetary stimulus initiated by the Federal Reserve. Tensions further escalated in 2018 with the onset of trade wars, posing threats to the technology-driven bull market.
The year 2020 introduced an even more challenging landscape with the onset of the pandemic and subsequent global economic paralysis, alongside the initiation of a reconfiguration in value chains. Pessimists appeared to have found confirmation of their fears. Yet, amidst this period of adversity, unprecedented opportunities emerged, exemplified by the subsequent new highs reached by the S&P 500 and the Nasdaq. Resentment towards this bull market resurfaced with Putin's invasion of Ukraine.
The situation compounded in 2022 with the deepening consequences of the invasion of Ukraine, leading to escalating inflation. The emergence of the concept of 'Stagflationary' became the new justification for pessimists. However, presently, the S&P 500 continues to chart a course towards new highs. In light of this scenario, questions arise: how can we navigate investments within this market? How can historical frameworks guide our investment strategies? And ultimately, why do we perceive this bull market as being much stronger than those witnessed in the 20th century?
Exploring the Bull Markets of the 20th Century: A Historical Journey
Now, let's embark on a journey to understand the essence of a bull market. It's more than just a surge in financial indices; it symbolizes a profound shift in the economic landscape, whether on a national or global scale. A bull market heralds significant transformations across pivotal sectors like energy, transportation, materials, food, and information processing. These changes, though sometimes subtle, present enormous opportunities for value creation. The intensity of a bull market stems from the convergence of these technological disruptions, shaping not only economic dynamics but also influencing our societal fabric. It's a catalyst for a shift in collective mindset, spawning new beliefs and values that in turn sculpt a fresh societal framework, mirroring the evolving needs of our world.
Much like the guiding light of the North Star for sailors, the stars of jazz, rock and roll, pop, grunge, indie folk and latin pop serve as beacons, indicating that a profound structural change is underway in our society.
The Charleston Bull Market: Louis Armstrong
Let's delve into an intriguing era often referred to as the Roaring 20s, but I prefer to dub it the Charleston Bull Market, named after the iconic dance craze and jazz maestro Louis Armstrong. This period was characterized by exuberance and innovation, as transformative shifts reshaped the global production landscape. Ford automobiles became a ubiquitous sight, revolutionizing transportation, while advancements in electricity powered societal illumination and industrial progress. Concurrently, the chemical industry introduced groundbreaking materials, marking the inception of the oil era. Despite emerging from the aftermath of World War I and amidst the upheaval of the Bolshevik Revolution, this era of uncertainty became a breeding ground for genuine transformation. Leading companies such as Standard Oil, Ford, General Electric, and Westinghouse played pivotal roles in driving economic expansion during this remarkable chapter.
The Rock and Roll Bull Market: Elvis Presley
Another bullish market worth our attention is the 1950s. I like to refer to this as the Rock and Roll Bull Market. This era marked the end of World War II and the geopolitical redefinition of the world. It witnessed an intense rivalry between two giants, the United States and the Soviet Union, competing for technology, strategic natural resources, and geopolitical influence. It was a time tinged with pessimism, as society feared potential nuclear annihilation. Yet, it was also an era of great creativity, where solutions to various challenges were discovered.
The oil industry reached its peak, and electricity found new synergies with advancements in the chemical sector. In the automotive realm, Ford was no longer alone, as Toyota and other emerging players offered more efficient and economical alternatives in car production. Additionally, nuclear energy was discovered, emerging as a new power source. The 1950s saw the birth of new social movements like hippies. It was the era of rock and roll, with Elvis Presley as its King.
It was a time when creativity triumphed over geopolitical challenges and pessimism. An era where the United States reconfigured its production model, transforming the economy and society on a global scale.
The Pop Bull Market: Michael Jackson and Madonna
Another pivotal bullish market, albeit with significant challenges, was the 1980s. This decade unfolded amidst a backdrop of pessimism, with stagflation and soaring oil prices due to the Iran-Iraq conflict, which had global economic repercussions. There was an urgent need for a new production model. Throughout the 1980s, the technological revolution in the computer industry reached maturity, heralding the dawn of the personal computer era. New giants like Microsoft, Apple, and Sun Microsystems emerged as leaders in this field, completely transforming the global economy. This period not only defined the rivalry between the United States and the Soviet Union but also propelled an economic model shift. Japan emerged as a new economic miracle, leading the way in production efficiency.
The 1980s were an era of immense creativity, giving rise to a new musical genre, pop. A new king emerged on the music scene, Michael Jackson, redefining the musical and cultural landscape of the time, succeeding Elvis Presley as the ultimate icon of the music scene. Alongside him, a queen graced the stage – Madonna, who made her mark as a revolutionary pop icon, pushing boundaries and shaping the pop culture of the era.
The Grunge and Pop Bull Market: Kurt Cobain and Britney Spears
The 1990s marked another significant bull market of the 20th century, coinciding with a period of drastic political changes worldwide. The fall of the Berlin Wall symbolized capitalism's triumph over communism, with the United States leading the way towards free markets instead of the prevailing totalitarian model in the Soviet Union. However, this era of economic optimism was also marked by significant challenges. Unemployment and recession affected many parts of the world, and labor migrated to emerging countries like Mexico, offering lower production costs. In Asia, especially in China, the seeds of impressive economic growth began to sprout.
The sentiment of pessimism was reflected in the music of the decade, with bands like Nirvana and their icon Kurt Cobain encapsulating the feeling of discontent in the grunge genre, which endured over time. Nevertheless, creativity always triumphs over pessimism. As the Berlin Wall fell in 1989, the first internet protocol, HTTP, was created at CERN in Switzerland, marking the dawn of the internet era. New protagonists emerged, such as Amazon, Yahoo, and Google. This new technological era led to the democratization of information and continued to fuel creativity. Pop found a new queen, none other than the best of the Spice Girls: Britney Spears.
The Metamorphosis Bull Market: Taylor Swift and Shakira
We've arrived at the current Bull Market, a pivotal moment that, in my view, began to unfold around 2010. It emerged amidst the gloom following the Lehman Brothers crisis, one of the most significant financial downturns in history. This somber backdrop was further intensified by the ascent of a new economic powerhouse: China, with its alternative economic model. This shift sparked intense competition for technology, strategic resources, and dominance in the global currency arena, reminiscent in many ways of the Cold War tensions of the 1950s and its technological race.
S&P 500 Compared Cold War 1.0 (US Vs Soviet Union) Vs Cold War 2.0 (US Vs China)
Today, the technological landscape has undergone exponential evolution. We're no longer just discussing IBM; we're talking about behemoths like Google and its subsidiary DeepMind, responsible for groundbreaking advancements in protein programming, material innovation, and nuclear fusion stabilization. We're witnessing a change of unprecedented magnitude, far surpassing previous decades' transformations in transportation, energy, materials, and information systems – akin to the monumental shift brought by the discovery of agriculture in human civilization's development. We're amidst a profound civilizational metamorphosis.
Two trailblazers in this metamorphosis are Taylor Swift and Shakira. While Taylor Swift enjoys a slight edge in commercial success, Shakira boasts a broader global influence, particularly in Latin America and Europe. Both artists have garnered acclaim for their songwriting prowess and have successfully explored various musical genres. Taylor Swift's journey spans from country to pop and indie folk, while Shakira's musical odyssey encompasses rock, pop, and Latin pop, venturing into genres like tango, bachata, and reggaeton.
What companies exemplify this transformative spirit? NVIDIA, Microsoft, and perhaps a reimagined surprise like General Electric. Or the burgeoning crypto technology that could underpin a decentralized economy. While the dominant crypto remains uncertain – whether it's Bitcoin, Ethereum, Solana, Polkadot, or a yet-to-be-created contender – we can discern that amidst FTX's fraud and Binance's investigation, Coinbase holds a formidable competitive advantage.
Thanks for reading,
Guillermo Valencia A
Co-founder of Macrowise
Ciudad de Mexico
March 11th , 2024