Understanding Cycles
Markets cycle: expansion, peak, contraction, trough. Professional allocators position differently for each phase. Early cycle: growth assets, small cap, emerging. Late cycle: quality, large cap, value. Contraction: cash, treasuries, defensive. Recovery: best returns for prepared investors.
Reading the Cycle
Monitor: employment trends, inflation, interest rates, credit spreads, asset valuations, sentiment. Position portfolio accordingly. Most investors ignore cycles and wonder why returns vary so dramatically year to year.
The Timing Advantage
Cycle awareness enables buying at troughs and selling at peaks. Not perfectly, but directionally. This compounds to massive returns over multiple cycles. Most investors are always fully invested and miss the advantages.
Read cycles. Position appropriately.