One of the fundamental skills of successful investors is to understand the inner clocks of markets. Experience shows that markets go up and down in cycles. But there is not just one cycle that happens as one might expect. Rather, there are many cycles overlapping. All cycles have different timelines. We detail below the relevant longer-term cycles. It shows, how long each of them takes and what the drivers are behind these cycles.

Common wisdom is that we have bull markets when the economy is growing healthy and we have bear markets before or around recessions. A deeper analysis shows that this is not at all true. In fact, bull / bear market cycles have a very different and longer-term rhythm than economic cycles which include recessions.

We will show that there are three longer-term cycles that act pretty independently of each other and with very different periods. For all investors, it is very important to understand where we are with respect to all three.

·      The interest-rate cycle.
This is a 60 year cycle that is driven by interest rates.
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·      The bull / bear market cycle.
On average, it takes 24 years to go through an entire cycle. It is crucial to understand where you are in this cycle.
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·      The recession cycle
This cycle takes 7 years on average. This is the cycle that most people actually mean when they talk about economic cycles.
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·       Interest rate cycle:
During times of increasing interest rates, investors are better off being careful with debt or treasury investments. Especially, it is important to avoid instruments with long durations (like 20 year Treasuries). When interest rates fall, these are great times for bond or Treasury investors. You can hardly make mistakes then.

·       Bull / bear markets:
In bull markets,  it is sufficient to buy funds, index certificates or similar. Investors can go long and sail with the winds. It is difficult to beat the index performance anyway. In bear markets, buy and hold simply does not work.  Then, you need to pick winning stocks or you time the market. Both are difficult and need specific skills.

·       Recession cycle:
Investors need to protect themselves prior to a recession. We will explore good early indicators in separate reports.

Let us look at all three long-term cycles:

·       Interest rate cycle:
The market is about to swing from a period of decreasing interest rates to one of increasing interest rates. That means that we enter a new phase that will bring very different dynamics from what we have seen since 1980. To be prepared for that new phase, we should understand the dynamics of the years 1946 to 1980

·       Bull / Bear markets: We are in a bear market since 2000. We have not even reached the average duration of a bear market which would be 12 years. As the financial crisis is deeper than most others in history, it would be more than surprising if we will see the lows before 2011/12.
An important indicator to watch is the PE multiple. It is still a long way down for it to reach the critical level of 10 which in history it has always reached before a bear market becomes a bull market.

·       Recession cycle: We are still in a recession. There are many indicators showing that this recession might become a real depression.