Blain’s Morning Porridge April 20^th, 2026: Day Trading vs 60-year K-Waves

“He must know something, but don’t say nothing…”

The markets are on a tear convinced normalisation is around the next corner. Yet they ignore the reality the Iran war has done significant damage to the global outlook – even if Tehran and Washington kiss and make up tomorrow. I don’t claim to understand the madness of markets and their ability to keep fooling themselves, but I do follow economic history and how events change outcomes.

LINK TO PODCAST

Here we go… another exciting week in the global financial markets…. What have we got to look forward to? Let me try to explain it … Trump is going to declare a new war on a country he had obliterated 2 ago weeks because they are doing what the US is doing– blockading the Strait of Hormuz? Is that about it? Think so. The story of the age – the War in Iran…. How much will US cabinet secretaries make this week front running Trump’s Tweets? Want to know what’s really going on in the White House? Try this article from the WSJ “Behind Trump’s Bravado, He Grapples With His Own Fears.”

But, what everyone really, really wants to know is why are Markets so hot when the outlook looks so dire? Stocks have been on a 2-week role since Trump declared he’s won and cease-fired. Markets have a habit of looking unconcerned, happily buying the dip, convinced everything will be fine, right up to moment it isn’t.

Back in the 1970s stocks also anticipated early upside after the October 1973 shock – expecting prices and supply would swiftly normalise after the Yom Kippur War. They did not. The 40% stock tumble came months later and lasted a year as it became clear just how deep and wide the economic consequences of higher oil and societal damage went. Inflation soared, earnings collapsed, unemployment rose, and angry politics got very messy. Prices recovered back to pre-shock levels by 1976 but tumbled again following the botched Jimmy Carter raid on Tehran in 1979 and stayed depressed for the next few years.

Today stock-pickers will tell you “this time it’s different” – the most dangerous words in finance.

They will say things like Trump wants peace, we will revert to stability, and the earnings outlook is strong – but what if they are misreading the man, the future and the data? What if Trump is just a Numpty – and there is no plan? The strength of US corporate earnings is based on factors like oil companies making bigger profits, chipmakers selling more chips, and defence contractors hoovering up new contacts. What if these are all reasons to worry, not dance for joy? The good news might be indications of bad things coming like short-term windfalls from a deepening oil shock, stockpiling because of escalating supply chain risks, and rising global conflict risks. If you are going to tell me Future PE multiples are top attractive – work out the real reason why.

I suspect something wicked this way comes… let me try to explain…

60 is a curious number. It is the number of years in the complex Animal and Element Chinese Zodiac Cycle – 2026 is a Fire-Horse year, said to be particularly risky because of volatility, conflagrations and destruction. 40-60 years is also the accepted length of the Kondratieff Cycle, the wave that rolls through economic history – the K-Wave as it’s called. I remember being terribly excited when I discovered all about it at university – but never imagined the wave has pretty much described my career; repeating booms and busts.

History and markets don’t repeat, but they do resonate – showing us threads of causality that might or might not explain what happens next. How markets, businesses, technologies, society and politics are intimately linked are the forces that drive the cycle. How they inter-react can be seen in the rolling pattern through periods of confidence and fear. K-Waves are typically described as starting with a long period of rising confidence, and then a denouement characterised by slow decline. We think of them as events, but they don’t have a start or end – they just keep rolling along.

Are we heading towards the final downside move of the current K-Wave? Most folk reckon the Great Financial Crisis (the “GFC”) of 2008 was the bust at the end of a 1945-2008 post war K-Wave. However, I’ve long argued the consequences, effects and distortions of the GFC are still with us. Markets are massively higher, but the last 18 years has been a flatline, stagnating European economy. Growth in the US has been in tech and services – manufacturing has died.

Plus, K-Wave theory says the cycle doesn’t complete till markets reflect the reality of the economy. I therefore suspect the big bust is still to come. The S&P500 is seven times higher than it was in 2009 – yet the US economy is not 7 times as large and worker wages have barely changed in real terms.

The last 60 odd years have thrown up a whole succession of waves within the cycle that amount to the K-Wave pattern:

• Following the 60’s consumer boom, Peace & Love hippy optimism was already in decline on the back of Vietnam and accelerated by the oil shocks and stagflationary decline of the 1970s, winters of discontent, and the nihilistic punk era.
• The current wave began as the mood changed in early 1980s under conservatives like Regan and Thatcher, the rise of financial markets, the value of housing and a feeling of growing personal wealth, the optimism of the big-bang boom, (the inevitable market burp in 1987), alongside the hedonism of the New Romantics and the middle-class niceness and easy social concern of Band Aid.
• The 1990s were fuelled by optimism from the ending of the Cold War, the Peace Dividend, and the rise of the individualistic club economy, culminating in the dot-com bubble.
• The 2000s were about the financialization of the economy, followed inevitably by the Global Financial Crisis as markets ran ahead of common sense and politics become increasingly centrist and no one had any time to be fashionable. The “End of History” and “Boom and Bust” cycles as some folk said.
• The 2010s were about economic weakness following the GFC and the monetary manipulation of economies – ultralow interest rates and copious liquidity – distorted markets, triggering stock market booms and rising wealth inequality.
• Inevitably the rich getting richer and the poor being left behind, combined with low rates failing to deliver real jobs or growth, led to the populism that has characterised the 2020s and rising doubts on our political-economic model.

And through that whole period – 1966-2026 – has been the thread of technologic change driving markets: mass consumerism, cars, colour TVs, home computers, the internet, mobile phones, the web economy, and now AI. Each tech development has magnified expectations. And each has been commoditised as it is replaced by the next new thing. (Did you see footage of the Chinese robotic half-marathon over the weekend. That’s another version of the future – we’re watching Beijing.. not a Tesla factory.)

• Now we face another oil-shock and the consequences are unclear.

What if the current oil shock heralds the down-wave at the of this phase of the ever-rolling Kondratieff wave?

I’ve taken the time this morning to explain where we are – the evolution of the economy through its last serious societal/market depression 50 years ago, into the current oil shock, because markets trade minute by minute, ignoring where we might be headed.

We know the risks of this oil shock – stagflation, supply chain dislocations, the effect of long-term price spikes in fuel and energy on logistics and travel, fertilizer delays leading to a food crisis later this year trigger mass migration and political tensions. The optimists say AI will make it all better, that companies will cope. Nothing to worry about.

The question is…. How long will markets remain oblivious to the rising reality around them? Longer than we think…

Out of time and back to the day-job…

Bill Blain

Author of the Morning Porridge
CEO Windshift Capital
Advisor – Spitfire Strategic Capital

Please don’t forget about my new book, The Battle For Hamble. It’s a proper grown-up examination of how bureaucracy has failed: a tale of Greedy Corporates, Bad Planning and Economic Illiteracy. It explains how a wholly unnecessary Gravel Quarry will be dug in middle of a prosperous village – putting 6000 jobs at risk. The truth is no one wants gravel, and the quarry company understands it’s not what you dig out, but what you stuff back into a hole in the ground that matters. Gravel sells for £30 a tonne – Landfill earns £150 a tonne to bury. Go figure.