As of recently, I hear a lot of talk by the financial industry about entering into a new “market cycle” (e.g. Fidelity podcast etc.). Basically, it’s now supposed to be “mid to late cycle” with a shift from growth stocks to value stocks, or from “cyclical” stocks (discretionary and financial companies) to “defensive” stocks (eg utilities, consumer staples, energy).
Personally, I don’t get this. How can one predict which cycle we’re in? Do cycles always have the same effect on stocks, no matter the underlying complex and fluid financial and economic factors? How are we to know how long a cycle lasts?
To me, it seems like marketing mumbo-jumbo, a justification of active management by the finance industry (sector rotation blabla), and maybe a hope for a self-fulfilling prophecy (look, we perfectly predicted our self-proclaimed cycle). I don’t think this theory is backed by science.
Wikipedia: However, many academics and professional investors are skeptical of any theory claiming to precisely identify or predict stock market cycles. Some sources argue identifying any such patterns as a “cycle” is a [misnomer], because of their non-cyclical nature.
But I’m happy to be corrected.
