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There is no such thing as news!
Well, what I mean is there’s no such thing as NEW news—at least in relation to the market. Everything that is happening now has happened before. And if it’s happened before—you guessed it—we can predict that it will happen again…or at the very least not be surprised when it happens again!
Seems like a silly reminder right? Yep, I wholeheartedly concur—EXCEPT that somehow market amnesia hits us all from time to time. This is especially true when the market is bearish and volatile. The fear grips us and we can’t think straight.
Just last month the DOW dropped 300 points and then just as suddenly rallied back 300 points. People started freaking out: “This has never happened before! Run for the hills!”
Well, my market memory-challenged compadres—it HAS happened before. It happened last August (just 6 months ago)! We were hitting extremes, experiencing ever-fluctuating volatility and the DOW was going berserk from one day to the next.
The Four Stages
So you see—and now fully recall—that everything is cyclical. In fact, it follows a well-laid out pattern.
This pattern, also known as the business cycle, is a long-term pattern of changes in Gross Domestic Product (GDP) that can be broken down into four stages: expansion, prosperity, contraction, and recession. As soon as the recessionary phase ends, the expansionary phase can start up again. What factors contribute to the changing stages? Employment changes, industrial productivity, and interest rates.
Some economists also believe that stock price trends precede business cycle stages. Essentially, this cycle is the very framework for economic activity and investing. So no matter what you are—employee, employer or investor—you are most certainly affected.
This is especially true when the cycle feels a few unexpected crosswinds. To avoid complete destruction, the government steps in. For example, if it appears that inflation is rising too quickly, the Federal Reserve (the central bank of the U.S. charged with handling monetary policy) may decide to raise interest rates to curtail spending. On the other hand, if the economy is performing poorly, the government may lower taxes to spur consumption and investment.
But while this all might seem out of the ordinary when it happens, I assure you it is all part of the process. Being constantly aware of the cycle will help you maintain composure in times when it seems the floor is disappearing beneath you. Also, I vow to help you minimize your market struggles and instead, steer you in the direction of market prosperity. Unbeknownst to too many traders, there are several ways to capitalize on market conditions—no matter what they are. I consider it my duty to divulge as much of these “hidden” facts as I can.
Join me at Trending123 — I just posted my newest lesson!
Sincerely,
John Lansing
Trending123
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