Stock Market Cycles - Can They be Predicted?
Tuesday, August 14th, 2007 Subscribe To Our Feed
The stock market goes up when investors put their money into stocks, and it falls when investor activity is down. There are a number of different factors that influence whether or not investors buy or sell stock, along with when and why they do so. A change in the direction of the market dose not always mirror the state of the economy. However, most of the time the strength or weakness of the stock market at any given time can be traced back to economic and political forces.
It is virtually impossible to pinpoint the bottom of a slow market or the top of a hot one until after it has happened. However investors that buy stocks in companies that do well in growing economies, and they buy them at the right time, are able to profit from their wise decisions. One of the characteristics of an expanding company is their ability to raise their prices as the demand for their products or services grows. Raising prices means more profits for the company and increased dividends and higher stock prices for its investors.
Because no economic cycle will exactly repeat an earlier one, it is impossible to predict with any degree of accuracy just what will happen in a growth or recovery period. Since only some companies do poorly in a slump, it is hard to determine which company’s will take the biggest hits, or find it harder to recover. the underlying strength of any company is probably as important to its performance as the state of the economy.
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