[Investment Philosophy (12)] - Judgment of the four seasons of the investment market

Common investors have a misunderstanding, that is, the stock market will rise only when the economy is good. If the economy is not good, the stock market will not rise, or it should not rise.

It is because of this misunderstanding that people do not accept the fact that the market will rise psychologically, and use practical actions to resist the rise of the market, thus missing opportunities.

The universe is huge and the market is huge. Investors can only survive if they humbly learn the operation of the universe, the alternation of the four seasons, and the cyclical laws of the market.

If you accept the market and learn the cyclical laws of the market, investing will become very simple. Making money is inevitable and easy.

The market goes up because there is too much money. When the economy is not good, the central bank lowers interest rates and relaxes currency, causing the money growth rate to increase and the market's capital momentum to increase. However, the economy is still not good, so funds can only enter the stock market. This is the first stage of the market's rise. We are still in the first stage of the market's rising (stock market spring).

Then the economy gradually improves, company profits increase, and the market rises faster and more violently. This is the second phase (stock market summer).

In the third stage (the autumn of the stock market), the economy begins to overheat, inflation occurs, interest rates rise, and the head of the stock market takes shape.

The fourth stage (stock market winter) is when the stock market falls, the economy declines, inflation is under control, and interest rates hit rock bottom. The first stage of the market is about to take place, and spring is not far away.

This is the four-season cycle of spring, summer, autumn and winter in the stock market and economy. We are still in the first stage of spring, although this spring is a bit long, enjoy this long market spring!

How to determine whether the central bank's monetary policy is loose or tight. A simple way is to calculate short-term interest rates minus the inflation rate. If it is lower than 1.4%, the central bank will adopt a loose policy. Now the inflation in the United States is 1%, and the ten-year interest rate is less than 2%, which is less than 1%. So it is a very loose monetary policy, and the market will continue to rise.

Inflation will rise in the future and interest rates will rise, but as long as the difference is below 1.4%, the market has the financial momentum to continue rising.

It is most important to understand how the market operates in four seasons. Looking at the market every day and guessing whether it will rise or fall tomorrow is as ignorant as looking at today's weather to predict whether it will rain or snow tomorrow.

Some people even predict the first snow of the year in spring. This is a common problem among most investors and analysts. The operation of the market is the flow of large amounts of money, which cannot be changed by words.

But because market investors and analysts are so wrong, we can easily make money in the market. Just accept it silently!

Date of writing: July 04, 2016