J.M. Funk’s theory, first articulated in his 1932 pamphlet "The 56-Year Cycle in American Business Activity", posits a recurring 56-year rhythm in US economic and business conditions, driven by a chain of cause-and-effect events influenced by human behavioral traits—such as aspiration, greed, and intemperance—and modulated by external rhythmic forces akin to solar cycles.
The
cycle transcends intervening factors like wars, technological
advancements, or monetary policy changes, manifesting as three major
panic periods within each 56-year span, spaced at intervals of
approximately 20, 20, and 16 years. The cycle's structure is visually
represented in a circular chart, originally drafted by Funk and redrawn
by financial astrologer David Williams in 1959 and 1982, which delineates key
phases: "Accumulating Surplus" (thrift and investment buildup),
"Absorbing Surplus Production" (rising prices and sales), "Panic and
Dumping" (market collapse and liquidation), "Industrial Stagnation"
(depression and low activity), and "Uncontrolled Production"
(overexpansion leading to renewed prosperity).
Funk's chart illustrates historical alignments across centuries, with years marked along concentric rings and "needles" connecting equivalent points in successive cycles. For instance, sequences such as 1801–1857–1913–1969 and 1817–1873–1929–1985 highlight recurring panic epochs, while subcycles (e.g., 9-year intervals) link shorter-term fluctuations. Prosperity emerges from post-panic thrift, fostering confidence and investment; however, extended booms breed overproduction, fictitious credit, and speculation, culminating in collapse. The depth of ensuing depressions mirrors the prior expansion's scale, with stock market drawdowns historically ranging from 25% to 40% during panic phases.
According to the cycle's alignment, late 2025 corresponds to the "Panic. Dumping." phase, characterized by high prices giving way to forced selling, bank strains, and commodity price collapses—echoing historical precedents like the Panics of 1857 (30% NYSE decline amid railroad overextension) and 1913–1914 (40% drop triggered by European liquidations). The chart's central long needle explicitly ties 2025 to this vortex, projecting a major bear market. An outer-ring marker at 2024 signals "High Prices. Sell Save," aligning with the S&P 500's peak on November 29, 1968, and suggesting a comparable crest in late 2024. This transitions into 2026, marked on the inner ring as "Low Prices. Buy," corresponding to troughs in January and May 1970 and indicating the onset of recovery.
Observed drawdowns during prior "Panic and Dumping" epochs:
■ The Panic of 1857, corresponding to the 1857 position on the chart, saw the New York Stock Exchange decline by approximately 30%, driven by bank failures, railroad overextension, and commodity price collapses.
■ The 1913–1914 crisis, linked to the 1913 marker, resulted in a roughly 40% drop in stock prices by August 1914, precipitated by European liquidations and heightened geopolitical tensions.
■ The 1968–1970 bear market, directly analogous to the 2025–2026 projection via the cycle's 56-year rhythm, featured a 37% decline in the S&P 500 from its peak on November 29, 1968, to its trough on May 25, 1970.
Quantitative projections draw from the 1968–1970 parallel, shifted by precisely 20,454 days (equivalent to 56 solar years): The S&P 500 declined 37% from its November 1968 high to its May 1970 low. Despite the panic designation, the decennial pattern of US stocks introduces nuance: 2025, as the fifth year in a decade, historically yields positive returns (breaking a rare negative streak seen in 2005), potentially mitigating the downturn's severity.
Supplementary analyses from related frameworks, such as Hurst cycles and seasonality (not part of Funk's original model), suggest the most probable initiation of a sustained contraction in late 2025, extending into Q1 2026—specifically January—with potential acceleration from seasonal weaknesses before stabilization. Magnitude remains speculative but could mirror the 37% 1968–1970 precedent, moderated by contemporary factors like Federal Reserve policy.
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