Weekend Reading: Understanding the Basics of Stock Market Cycles

This article appears as part of Casey Weade's Weekend Reading for Retirees series. Every Friday, Casey highlights four hand-picked articles on trending retirement topics and delivers them straight to your email inbox. Get on the list here.
Weekend reading stock market cycles Weekend reading stock market cycles
Weekend Reading

An awareness of how markets tend to move over time will help you better execute your investment strategy and feel more confident in times of volatility.


Here, author Darius Foroux discusses the four stages of the stock market cycle:

📌 The accumulation phase: Follows a bottomed market when investors are cautious, but beginning to buy again.

📌 The markup phase: The market experiences a bullish trend and investors start to gain confidence and buy stocks.

📌 The distribution phase: The market reaches its peak, starts to become saturated and investors begin to sell their stocks.

📌 The downtrend phase: The market experiences a bearish trend, prices tumble and investors panic sell their stocks.

Markets move like seasons: Typically, market cycles last between six-to-12 months. On the other hand, “external factors like fiscal policies of major economies and central banks can have a significant influence on the length of a cycle.” Foroux emphasizes the importance of being aware of which stage the market is in. However, you should also realize that the next stage of the cycle is often closer than you think.

When you’re feeling bearish about market downturns, keep in mind that based on the entire history of the S&P 500, the market continues to trend upward. We will always have dips, but the long-term direction is up.