Not every cycle is the same, and not every economy is in the same stage at the same time. Still, we find the changes quite reliable, and inevitable.
Bonds, stocks and commodities, they all take turns.
Stage 1. The economy is still slowing, rates fall, and bond bulls are the only ones smiling, that’s the let’s put someone to prison stage, like FTX.
Stage 2. Stocks join bonds, long before the economy looks any better. Everyone says it’s a dead cat bounce. It isn’t.
Stage 3. Commodities bottom, and everything goes up together. Everyone makes money here, however terrible they are at markets. This is where gurus, or Leopolds, and such are born.
Stage 4. Inflation picks up, and bonds roll over. Stocks and commodities keep going. Terrible things raise money, the gurus are now selling courses.
Stage 5. Stocks top out. Only commodities are still doing ok, but not all. Everyone who earned in stage 3 is now buying the dip.
Stage 6. Everything falls. Cash is king, the courses go on sale, and the cycle starts over. Cleansing time.
So where do people make money? In stage 3-4, everyone does. In every other stage, only those who follow the trends, and it’s way more difficult.
Nobody really knows when the stage changes, which is why we don’t try to call it. Trends tell us when to move out of the way.
Stay safe out there!
Chart: StockCharts.com, based on Martin Pring’s six stages.