Market Cycles
What It Is
Market cycles are recurring phases of rising and falling asset prices driven by economic conditions, investor psychology, and liquidity.
Why It Matters
Understanding cycles helps investors anticipate turning points and adjust strategies for risk and opportunity.
How It Works
- Accumulation: Smart money buys after a downturn
- Markup: Prices rise as confidence returns
- Distribution: Institutions sell into strength
- Markdown: Prices fall as sentiment deteriorates
Key Components
- Investor psychology
- Economic trends
- Liquidity conditions
- Valuation shifts
Example
The long bull market from 2009 to early 2020 was followed by a sharp markdown during the COVID‑19 crash.
Key Takeaways
- Cycles repeat but never identically.
- Liquidity and sentiment drive transitions.
- Recognizing phases improves timing and risk management.