May 31, 2019
The theme for this week is: stock market cycles...explained. If you’re an investing novice, like the vast majority of Americans, the stock market and it’s wild gyrations can seem intimidating and confusing. But what if I told you that the cycles of the stock market are actually more regular than you think, and hence more predictable.
Now, in episode 227, 2 days ago, I explained the complete market cycle. If you missed that episode, go back a couple days to episode 227. It’s critical that you understand the full explanation of the market cycle as well as how long these market cycles usually last, which is the topic of today’s tip.
According to assymetryobservations.com, “A complete market cycle (or a full market cycle) generally lasting 4-5 years. The average bull market from 1937 to 2013 is about 39 months. The average bear market is about 17 months”, providing a total cycle length average of 56 months, or 4 years and 8 months.
Interestingly enough, the current market cycle we’re in has lasted more than 2 times that long - if we mark the start of the current market cycle by the bottoming out in March of 2009, we are 122 months in, and as I argued yesterday, we haven’t yet reached even the mid-point or the top of this market cycle.
So market cycles and their timing can vary...a lot! The other point to note here about market cycles, is that the market can pass through stages in the cycle in a matter of days, weeks, months, or even years. In the current cycle, it seems that we spent quite a long stretch of time in the early stages of the upturn, defined by hope and optimism. Investors didn’t even seem excited about the markets until last summer, already 9 years in to the current upswing.
On the other end of the spectrum, I’ve also seen the market pass through pessimism, panic, and capitulation relatively quickly back in 2008. The market was ripping apart at the seems, and quickly.
The point here is that entire market cycles can be long or short, and the stages within them long or short. Pay attention to the prdiciably order of the steps and you’ll be less likely to miss where we are in a given cycle, no matter how long or short that stage lasts.
That’s it for today. Thanks for listening.
My name is Ashley Micciche and this is the One Minute Retirement Tip.
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