They say that the stock market is future -oriented.
They also say that the stock market has predicted 9 of the last 5 recessions.
So what is it?
Is the stock market all voculate?
Or is it just as bad as someone of ours when it comes to looking around the corner with what is going to come?
It’s a bit of both.
Chart Kid Matt Has this great graph on his NEW BLOG This shows that the stock market tends to use in a bear market before the income:
On average, the shares at the front of the profit ran for 9 months.
Take a look at the recession of 2008 and 2020 to see how this happened in practice:
The stock market became higher before the income of the company’sbed. The market saw the turnaround coming before it even happened!
This is one of the reasons why it can be so difficult to invest in a bear market. The news gets worse, even when the shares go up again. Everyone thinks it’s a dead cat because the income continues to fall.
It is a leap of trust that buys during a bear for a reason.
You have to trust that the market knows something that nobody else is doing.
However, the stock market is not entirely nostradamus when it comes to choosing the end of a bull market.
The stock market and the income tend to worry around the same time when the bull market ends.
See what happened at The Peaks in 2007 and 2020:
Shares and income are more or less at the top. There is not much signal there, because they both roll together.
So the stock market is better at predicting soils than tops.
Nobody is perfect.
This is what makes investing equal sharing interesting and difficult.
Investing when shares are down requires a leap in faith because you assume that the market knows something that the headlines do not know.
And investing when shares are up requires a jump of faith because you have no idea when the rug is pulled under your feet without warning.
This is one of the reasons why shares offer a risk premium compared to other activa classes.
If investing in shares was simple, you would not earn a high return in the long term.
No risk, no reward.
Continue reading:
How bear markets work
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