If we consider that we are at the low point or at the bottom of the stock market cycle, surely the economy is in a poor state and also it has been expected to get worse than it was. This will gives rise to the view that the interest rates will stay down. This is a way to counteract the on going economic downturn and also at the back of this kind expectation, the interest-rate of the stocks would start to perform well.
At this point in the cycle, the banks would generally take the lead, and it will then be followed by some of the financial players. As the situation becomes more obvious that the economy is slowly starting to recover, the bull trend within the stock
market would gather the momentum that it needs. The dominant force at this time would now be the consumption. The stocks that move coincidentally along with the economy will start to be the market leaders in the market.
The high-street retailers, for instance, would be featured regularly in the stock market reports. The financial stocks should have not peaked at this stage however, this is because the market has been rising for a longer time which is relative to the other sectors of the market, although they may not seem to be so attractive. Also their rate of the stock price rise would slow down.
Lastly, the economy that we have will soon be seen to have reached it’s peak as well as the optimists would also be expecting for a gradual slowdown and also the pessimists will also be anticipating for a full-blown recession in the market.
This then is a bit on the cycles of the stock market. Once the momentum begins to build, the speculators will enter the market and drive it up further. The trick is to jump in near the beginning of the stock market cycle and ride the wave upward to high profits. I read recently about an investor who purchased blue chip stocks for dirt cheap when they were very undervalued. He has made a fortune on being willing to buy when everyone else is selling.
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