Don’t Let Talk of Market Cycles Take You for a Ride

It’s human nature to want to think that seemingly unrelated things are related. We look for patterns and cycles. The same thing is true for investments. Sometimes the data can (seemingly) verify this. As laid out in the article below, there are some measures of the overall economy such as GDP growth, inflation and employment that are highly correlated. But change in stock market prices? They are way too fast moving & any autocorrelation is negligible. One period’s return tells you almost nothing about the next. Yet we may keep looking for it & hence actually see it.

Hope you enjoy the article!

-Neel