War, Inflation, and Technology Super-Boom Model
Identify secular bull markets emerging from conflict, inflation, and innovation
- Difficulty
- Advanced
- Time to result
- ~months to results
- Steps
- 5
- Confidence
- 94%
The model begins with a major conflict or crisis that prompts exceptional government spending, disrupts supply, and contributes to inflation. When the crisis ends and inflation stabilizes, relief, pent-up demand, and accumulated investment can support an extended economic and market expansion. The decisive additional input is a group of culturally enabling, productivity-enhancing technologies such as automobiles, air travel, microprocessors, the internet, biotechnology, energy innovations, or artificial intelligence. These technologies turn liquidity and reconstruction into new industries, infrastructure, and productive capacity. Investors then compare the resulting pattern with previous postwar secular advances while recognizing that history does not impose a fixed duration. The intended output is not a short-term trade but a judgment about whether conditions support a multiyear secular bull market.
Origin
Yale Hirsh developed the original war-plus-inflation thesis after studying market behavior following the world wars and Vietnam. Jeff Hirsh later added productivity-driving technology to the model and applied it to the post-2009 and post-COVID periods.
Core principles
- 01Major government spending injects capital into the economy
- 02Inflation can accompany the transition from conflict or crisis to expansion
- 03Productivity-enhancing technologies convert spending into durable growth
- 04Secular cycles should be distinguished from short cyclical rallies
- 05Historical patterns provide context, not fixed market timetables
How to run it
- 1
Locate the catalytic disruption
Identify the war, pandemic, financial crisis, or other disruption that generated extraordinary public spending and economic dislocation. Establish whether it is large enough to affect the wider economic cycle.
Pro tip Include nonmilitary crises when their fiscal and supply-chain effects resemble wartime conditions.
Watch out Do not treat every geopolitical incident as a cycle-changing event.
- 2
Track spending and inflation
Assess how much money entered the economy and whether shortages, pent-up demand, or fiscal stimulus produced broad inflation. Watch for inflation to level off after the initial shock.
Pro tip Examine the underlying inflation mechanism rather than relying on a single headline measure.
Watch out Persistently accelerating inflation may undermine rather than support the transition.
- 3
Find enabling technologies
Identify a cluster of technologies capable of changing daily life, creating industries, or raising productivity across the economy. Look beyond one fashionable product to the broader innovation ecosystem.
Pro tip Favor technologies supported by infrastructure, adoption, and measurable productivity effects.
Watch out A speculative technology narrative without widespread adoption is insufficient.
- 4
Compare secular market structures
Use long-term, preferably logarithmic, charts to compare the current market pattern with earlier post-crisis expansions. Separate normal cyclical declines from changes in the secular trend.
Pro tip Compare several historical periods rather than forcing the present into one precedent.
Watch out Historical resemblance does not guarantee identical returns or timing.
- 5
Form a range-based outlook
Estimate whether the evidence supports an early, middle, or late-stage secular advance, then express the conclusion as a range rather than an exact date. Continue updating it as inflation, productivity, and market structure change.
Pro tip Use the model to set strategic exposure, not to predict individual market turns.
Watch out Do not assume that all secular bull or bear markets last the same number of years.
In the wild
After World War II, returning service members received education through the GI Bill while suburbs, interstate highways, automobiles, civilian aviation, electronics, and household appliances expanded. The combination of redirected spending, demographic growth, infrastructure, and enabling technologies supported a long economic expansion.
→ The postwar environment produced strong economic growth and a major secular stock-market advance.
COVID generated wartime-like fiscal spending, supply constraints, pent-up demand, and a sharp inflation spike. As those pressures eased, artificial intelligence and other technologies offered a possible productivity engine analogous to technologies that powered earlier expansions.
→ The model classifies the period as a plausible continuation of the secular boom that followed the financial crisis.
Common mistakes
Treating war itself as bullish
The model concerns the economic transition after conflict or crisis, not the destruction and suffering caused by war. Peace, normalized activity, spending, and innovation drive the proposed mechanism.
Assuming every cycle lasts 18 years
Historical secular markets have lasted very different lengths because wars, depressions, innovations, and other events alter their course.
Ignoring the technology input
Spending and inflation alone do not explain a durable boom. Broadly adopted technologies must translate investment into productivity and new economic activity.
Is it for you?
Best for
It is best for long-term investors assessing markets after wars, recessions, pandemics, or major fiscal interventions.
Not ideal for
It is not ideal for short-term trading or precise market-timing decisions because secular cycles vary substantially in duration.
From the transcript
“there was inflation stimulated by government spending, and then after the inflation leveled off, the market went into this rally of five hundred percent or…”
“It's government spending period. It just puts a lot of money into the economy, enables a lot of development.”
“it's a it's a cocktail of different technologies that drive productivity and the next boom, the next boom and new developments.”
From the episode
At the Money: Is War Good for Markets?