Are market cycles BS?

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.

As far as I know, in theory there are market cycles, and it is empirically proven, that some sectors peforms better in different parts of the cycles.
It is probably also possible to know in which phase we are right now.
The big BS are the people stating they can predict when we will switch to the next phase, and thus rebalance on time to obtain an overperformance. Nobody knows that.


Those theories are completely legit.

Just because a few people in an Internet forum and a book author says that VT is the only legit thing to invest in on this planet and everything else is scam, I wouldn’t go as far and say that a whole academic field and profession is just marketing mambo jumbo.

Yes, for most people, especially those who want an easy solution and absolutely no effort, this may be the best strategy, but it doesn’t mean that everything else is voodoo.

Come on … seriously? Even in Switzerland we have academic institutes that are heavily into this field. And I don’t think companies would employ researchers and analysts in the field if it would be just marketing mumbo jumbo. Then probably a marketing expert would be cheaper.

Yes, that’s exactly the point. We can’t “exactly” and “precisely” predict something. Those are theories that give us an understanding how the whole thing more or less works, what usually works better in what phase, what usually happens etc. so may be we are too late, too early, maybe we’re right in 6-8 cases out of 10, not always. But that doesn’t mean a whole academic subject is just mumbo jumbo.

But this is the case with many scientific fields … in many fields we don’t know everything and many things and theories in science are not exact but approximations.


I agree. Cycles exist and can be observed, but in hindsight when you look at the past decades.

There are objective ways to tell where we are in the cycle, for example when we reach all time highs it is clearly a bull market and when we are down 20% from the previous all time high it is clearly a bear market.

But predicting the end of the bull market? Telling that we have reached the bottom? Nobody can do that and I don’t trust anybody who claims to know.

At best, what we can do is rebalance. When we reach an all times high it makes us sell stocks, and when there is a bear market it makes us buy them. That doesn’t require any ability to tell what comes next.


I also asked myself: is one “late cycle” always the same as another “late cycle”? What’s the exact definition of it? If now’s a late cycle: Have we ever been in the same situation like now? I mean, looking at the past can never predict the future. That’s why backtesting to draft new strategies is mostly mumbo jumbo aswell imho :grin:

That’s the thing: we’ll be able to say in maybe two years. Today we can’t, apart from a general feeling. People were already talking about a late cycle in 2019. As they did in 2018, in 2017, in 2016 and so on. You just can’t tell with certainty.

If anybody could tell, they wouldn’t be on TV bragging about it. They would use that knowledge with their own assets.