Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail
Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail

Market Cycles

What it is:

Market cycles are the periods of growth and decline in a market, sector or industry.

How it works (Example):

In a quantitative sense, market cycles are visible in price movements that rise, fall, and return to their point of origin. In a qualitative sense, market cycles are periods of innovation within specific industries. The stock and earnings of companies in these industries tend to outperform the market during such periods.

For example, the business cycle -- during which an economy expands, contracts, and recovers -- is a prime illustration of a market cycle. Another example would be bond market, which experiences gains and losses in response to cyclical interest-rate

Why it Matters:

Market cycles are primarily expressed as time-series data and play an important role in technical analysis. Therefore, market cycles help analysts and policymakers make decisions and help traders determine the best prices at which to buy and sell securities.