Market Cycle Theory

Market Cycle Theory posits that financial markets move through a series of stages: growth, peak, decline, and recovery. During growth, investor confidence drives prices up. At the peak, enthusiasm may lead to overvaluation. The market then declines as optimism wanes, often triggered by negative news or economic shifts. Finally, the recovery phase begins as prices stabilize and investors regain confidence. Understanding this cycle helps investors make informed decisions, recognizing that market dynamics are cyclical rather than linear, and that patience and strategy are essential for long-term success.