how market cycles work
new market cycles form when trends within a particular sector or industry develop in response to meaningful innovation new products or regulatory environment these cycles or trends are often called secular during these periods revenue and net profits may exhibit similar growth patterns among many companies within a given industry which is cyclical in nature market cycles are often hard to pinpoint until after the fact and rarely have a specific clearly identifiable beginning or ending point which often leads to confusion or controversy surrounding the assessment of policies and strategies however most market veterans believe they exist and many investors pursue investment strategies that aim to profit from them by trading securities ahead of directional shifts in the cycle there are stock market anomalies that cannot be explained but occur year after year special considerationsa market cycle can range anywhere from a few minutes to many years depending on the market in question as there are many markets to look at and the time horizon which is being analyzed different careers will look at different aspects of the range a day trader may look at five minute bars whereas a real estate investor will look at a cycle ranging up to 20 years types of market cyclesmarket cycles are generally considered to exhibit four distinctive phases at different stages of a full market cycle different securities will respond to market forces differently for example during a market upswing luxury goods tend to outperform as people are comfortable buying powerboats and harley davidson motorcycles in contrast during a market downswing the consumer durables industry tends to outperform as people usually don t cut back their toothpaste and toilet paper consumption during a market pullback the four stages of a market cycle include the accumulation uptrend or mark up distribution and downtrend or markdown phases market cycles take both fundamental and technical indicators charting into account using securities prices and other metrics as a gauge of cyclical behavior some examples include the business cycle semiconductor operating system cycles within technology and the movement of interest rate sensitive financial stocks 