posted on 06-06-2019

Market Cycles

Updated October 1, 2019

What are Market Cycles?

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

How Do Market Cycles Work?

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 Do Market Cycles Matter?

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.