I endorse ESRogs’ replies. I’ll just add some minor points.
1. Nothing in this book or the lifecycle strategy rests on anything specific to the US stock market. As I said in my review
The fact that, when young, you are buying stocks on margin makes it tempting to interpret this strategy is only good when one is not very risk averse or when the stock market has a good century. But for any time-homogeneous view you have on what stocks will do in the future, there is a version of this strategy that is better than a conventional strategy. (A large fraction of casual critics seem to miss this point.)
If you are bearish on stocks as a whole, this is incorporated by you choosing a lower equity premium and hence lower overall stock allocation. This choice is independent of the central theoretical idea of the book.
2. Yours is a criticism of all modeling and is not specific to the lifecycle strategy.
3. As ESRogs mentioned, neither this book nor my review has the timing you suggest, so the psychoanalysis of proponents of this strategy appears inconsistent.
4. I acknowledged this sort of argument in my review, and indeed argued that the best approaches hinges on such correlations. But consider: even in the extreme case where I believes my future income is highly correlated with the stock market and is just as volatile, the lifecycle strategy recommends that my equity exposure should start low when I’m young and then increase with age, in opposition to conventional strategies! So even if you take a different set of starting assumptions from the authors, you still get a deep insight from their basic framework.
I endorse ESRogs’ replies. I’ll just add some minor points.
1. Nothing in this book or the lifecycle strategy rests on anything specific to the US stock market. As I said in my review
If you are bearish on stocks as a whole, this is incorporated by you choosing a lower equity premium and hence lower overall stock allocation. This choice is independent of the central theoretical idea of the book.
2. Yours is a criticism of all modeling and is not specific to the lifecycle strategy.
3. As ESRogs mentioned, neither this book nor my review has the timing you suggest, so the psychoanalysis of proponents of this strategy appears inconsistent.
4. I acknowledged this sort of argument in my review, and indeed argued that the best approaches hinges on such correlations. But consider: even in the extreme case where I believes my future income is highly correlated with the stock market and is just as volatile, the lifecycle strategy recommends that my equity exposure should start low when I’m young and then increase with age, in opposition to conventional strategies! So even if you take a different set of starting assumptions from the authors, you still get a deep insight from their basic framework.