Stock market a long-term investment: seize the opportunity of the economic cycle
patient investors can often become the most successful investors. Long-term investments are the investments of these people prefer type. Long-term investments in the stock market, is necessary to grasp the long-term trend of the market. Using the law of economic cycles to opportunity is a good way to find out.
long-term investments tend to be successful investors prefer the type of investment. How to grasp the market trends in long-term investment in the stock market, take control of best buy share time? For this, we can consider it from the point of view of economic cycles. Economic cycle is divided into 4 phases: recovery or growth, inflation, slowed, a recession.
stocks: discover the law of economic cycles
in the recovery period, the Government will raise interest rates or no change; during the inflationary period, substantial interest in General; during the slow period, the Government will cut or remain unchanged; in a recession, the Government will dramatically cut.
during the recovery period, as the whole community has just emerged from the gloom of the recession, the economy is fragile, and the Government raised interest rates substantially. At this time, the Government raised interest rates usually keep up with corporate profit growth, so there will be more rate hikes case for a stronger stock market. During the inflationary period, although the Government has expanded the range of interest rates, but there is a lag effect because the economic reaction to the rate hike, the interest will not immediately do, usually according to the strength of the economy at that time, there will be a reaction period ranging from a few months to a year. Rising interest rates may occur at this time, stocks also strengthened.
during the slow period had a similar effect, because the economy just went through a period of inflation, and the Government substantial reduction in interest rates. At this point, the cuts in interest rates can't keep up with increases in corporate profits slowed, so there will be more cuts in the stock market the more lower case. During the recession, while the Government increases the margin for a cut, but because of the lag effect of economic cuts, leading to lower interest rates, the stock market also fell.
it is easy to see, the lagged effect of interest rate makes the stock market movements and economic cycles appear consistent to some extent. Government does not want to see this, because it gives many adverse effects on the economic forecasting and policy implementation. Former Federal Reserve Chairman Alan Greenspan during his tenure has been committed to the economic forecast and the lagged effect of eliminating this interest rate, to the steady growth of the economy.
investment layout: ahead in the economic cycle
, of course, the stock market is not completely correspond with the economic cycle. During the worst heat and the worst of times, stocks also depends on how players are predicting economic cycles. In the United States such a mature market, there are thousands of economists forecast the economy, will try for some time before the economy starts to grow equity portfolio, good investment of their formation. Based on experience, the lead time is about six months to 9 months. Can be said that the stock market usually is a barometer of a country's economic forecast.
investors understand the present state in which stage of the economic cycle, and can achieve higher rates of return than the market. Successful investors try to predict major turning points in the market, when there are several factors indicate significant changes in the market, they will start investing in the layout.
in the United States, these factors include all companies in the index of profits and, employment reports, CPI (consumer price index), the total retail sales, durable goods orders, fed meeting report, GDP (gross domestic product). How to understand these factors? This requires investors usually accumulate a lot, often to pay attention to these messages, which can predict the market will increasingly feel.