Market Cycles

What are 'Market Cycles'

1. Trends or patterns that may exist in a given market environment, allowing some securities or asset classes to outperform others. The securities themselves may exhibit price patterns in their trading.

2. Trends within a particular sector or industry created by a particular innovation, product line, or regulatory environment. Revenue and net profits may exhibit similar growth patterns among many companies within a given industry.

BREAKING DOWN 'Market Cycles'

Market cycles are often hard to pinpoint until after the fact and rarely have a specific beginning or ending point. However, most market veterans believe they exist, and many investors pursue investment strategies that aim to profit from them by trading securities within the swings of the cycle.

Market cycles take both fundamental and technical indicators (charting) into account, using securities prices and other metrics as a gauge of cyclical behavior.

Some examples include the business cycle, semiconductor/operating system cycles within technology and the movement of interest-rate sensitive financial stocks.