Understanding Time Cycles

Everything in life moves in cycles and Investments are no exception.

In the stock market there is a Circa. 18 year cycle – this is the main one, it is responsible for Inflationary cycles and Deflationary cycles.

The concept of this and especially the timing in relation to your own personal Investment life is crucial to the returns you might potentially obtain, I’ll cover this further later on this page.

If you’ve already bought my recommended book by Dr. Van Tharp, then you’re already aware of this fact.

Let’s take a quick look at cycles since 1949:

1949-1966 = 17 years – This period was BULLISH & Inflationary

1966-1982 = 16 years – This period was BEARISH & Deflationary

1982-2000 = 18 years – This period was BULLISH & Inflationary

2000-2017  = 17 years – This period WILL be BEARISH & Deflationary (Already confirmed)

2017-2034 = 17 years – This period is expected to be BULLISH and Inflationary

A clear pattern is forming, that covers 64 years.  Have a stab in the dark of the market type for the next 18 year cycle, it should be Bullish and Inflationary up into the mid 2030’s at which time it should get rather nasty once again.

It is possible to further refine these 18 year cycles for the big up and down moves within them, but I’m not covering those in these pages.

OK, so how can you use this knowledge?  Well it has everything to do with when you’ll be exposed to the effects of the said Time Cycle – this usually occurs when you have money invested in the market for a specific purpose – usually retirement, so it’s fairly important.

Just by knowing roughly when these cycles are due to start you can position your portfolio accordingly – most people prefer to just buy and hold, It’s not how I do things, but in the right circumstances and environment it is a valid method of investment and more importantly it works.

But and there’s a big but – Buying and Holding is best suited to the BULLISH and Inflationary sections – you will find frustration galore by those that try to Buy and Hold during a BEARISH & Deflationary market cycle – look at all those people who Invested in 1999 this way, 8 years later they were back to breakeven (2007) If they still held on then, then it was another 5 years until they got back up to breakeven – so essentially their portfolios were back to the 1999 levels some 14 years later!  No growth for 14 years!

Obviously everyone is different and have different starting and ending dates etc – I’m in no doubt that some people from 2000 onwards would have got lucky and made decent money, especially those who came to the game in 2003 or 2009 times, blissfully unaware that all that has happened is they’ve timed it lucky through sheer luck and when they choose to invest – NOT through skill!  The market was always going to rise in 2003, no matter how good a persons analysis.

At this stage in your learning and understanding just think that markets tend to rise rapidly during the Bullish market cycle with a couple of severe falls that always recover and that during the Bearish market cycle the market will yo-yo with major falls, but essentially over the Bearish market cycle the market will not have progressed much.

The whole point of Investing and being exposed to the markets is to beat what you can obtain from a bank account, due to the added risk (see my page on Asset Allocation) the best chance of achieving this with ease is during the BULLISH market cycle .

The BEARISH market cycles are likely to cause frustration, panic and stress – the preceding 18 year Bullish market cycles usually last just long enough to lull everyone into a false sense of expectation from the markets, along comes the devastating Bearish phase and puts everyone back in their place!

This Bearish phase then lasts just long enough that everyone can’t imagine a prolonged Bullish phase, etc etc.

I’ve with-held publishing this page for a number of years, simply because I’m pretty confident that most “professional traders/Investors” don’t even know about this sequence and Time cycle.  In terms of returns this one page is probably worth to an investor the equivalent of making the high end of a few hundred percent on their Invested funds!

This is my own personal journey of experiencing the cycles that exist:

I started Investing in the mid to late 1990’s = Bullish phase – aged 20-25

I’ll experience the full effects of the 18 year Bearish phase that started in 2000 – aged 25-43

I’ll also experience the full effects of the next Bullish phase – aged 43-61 (Retirement age!)

and If I manage to live a further 18 years I’ll see another Bearish phase

This is my Investment Life that I mention elsewhere on this blog – 1 and a bit Bullish phases and 2 FULL Bearish phases – this is the reason you hear people moaning about Investments, it’s because the odds are against you in the Investing stakes purely due to these cycles.

I used to be a Financial Adviser – my experience tells me most people leave worrying about Investing until they are in their mid to late 40’s – that just leaves them at the mercy of lady luck in their Investment Life with regard to the positioning of the Time Cycle, some will come out winners, others flat and others will lose – If I can help a handful of people understand where they stand within these time cycles I’ll be happy.

So lets use and look at a 18 year section, the best one to look at is the section 1982-2000:

This was a full on Inflationary section, the Dow in 1982 was around 800-900 points, so if we call it 850 we’ll not be too far from the truth and in 2000 the Dow reached a high of 11908.

the maths for this period is:  Ending point = 11908 pts, starting point = 850 pts= 11058 points = 1300% gain divided by 18 years = 72% gain on average per year for that period – read it again 72% gain on average per annum during those 18 years! That is tremendous, until…….

Where it all starts to go wrong is when you don’t get out of the market for the slumps that happen during the bearish cycles and that is what brings your returns down to the “10%” per annum that the fund managers make and swear by – what the fund managers don’t tell you is that they are FORCED to remain virtually fully invested at all times, that includes during market meltdowns! Which explains the measly 10% per annum returns

This one page is worth thousands £ to you, I’m pretty confident that most so called Investment “Professionals” don’t even know of this cycle, I’m 100% certain they’ve not a clue of the smaller cycles within the 18 year cycle either.

 

Well I hope this page has helped you or will help you.  I’ve thought long and hard and resisted publishing this page for over 2 years because of it’s content.  I don’t share all of my knowledge on this blog, some of it is too valuable to reveal.

A farmer will tell you that it’s best to make hay when the sun shine’s, I say it’s best to invest according to the expected Time Cycle in play.

 

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