The Little Book of Stock Market Cycles
While predicting the direction of the stock market at any given point is difficult, it's a fact that the market exhibits well-defined and sometimes predictable patterns. While cycles do not repeat exactly all of the time, statistical evidence suggests that cyclical tendencies are very strong and should not be ignored by investors. The Little Book of Stock Market Cycles will show you how to profit from these recurring stock market patterns and cycles.
Written by Jeffrey Hirsch, President of the Hirsch Organization and Editor-in-Chief of the Stock Trader's Almanac, this reliable resource explains why these cycles occur, provides the historical evidence behind them, and shows you how to capture consistent profits from them moving forward. In addition to describing his most widely followed cycles and patters, Hirsch also discusses both longer term boom-bust economic cycles and shorter term tendencies involving the best days, weeks, and months of the year to trade the market.
- The methods found here follow everything from presidential election cycles to the "Santa Claus" effect
- Written by Jeffrey Hirsch, the pre-eminent authority on market cycles and seasonal patterns
- The strategies explored are easy-to-implement, and based on research that has proven profitable over the course of time
For investors looking to beat the buy-and-hold philosophy, The Little Book of Stock Market Cycles will provide simple, actionable ideas that have stood the test of time and consistently outperformed the market.
Chapter One Cutting through the Bull 1
Chapter Two War and Peace 11
Chapter Three A Century of Booms and Busts 23
Chapter Four The Coming Boom 47
Chapter Five Your Portfolio Gets Political 69
Chapter Six Open Season for Stocks 95
Chapter Seven Aura of the Witch 105
Chapter Eight Autumn Planting 115
Chapter Nine Winter of Content 127
Chapter Ten Spring Harvest 149
Chapter Eleven Summer Doldrums 159
Chapter Twelve Celebrate Good Times 169
Chapter Thirteen Don’t Sell on Friday 187
Chapter Fourteen Picking the Ripe Trade 197
JEFFREY A. HIRSCH is the Chief Market Strategist of Magnet Æ Fund, President of the Hirsch Organization, Editor-in-Chief of the Stock Trader's Almanac, and coauthor of the Commodity Trader's Almanac. He's worked with founder Yale Hirsch for over twenty years, taking over for him in 2001. Mr. Hirsch appears frequently on CNBC, CNN, Bloomberg, FOX Business, and many other national and international media outlets to discuss market cycles, seasonality, trading patterns and forecasts, and historical trends. He also edits the firm's digital toolkit, Almanac Investor, a subscription-based product including investor alerts, market data, and research tools.
‘…a nice primer on cycle research and an excellent starting point for further research…he has given us an insightful collection of market observations and plenty of food for thought. I recommend you add it to your winter reading list.’ (ForexPros, November 2012)
While no magic formula can ever replace research, experience, and healthy dose of luck when it comes to making trades or investing, Stock Trader’s Almanac Editor-in-Chief Jeffrey Hirsch argues that by analyzing and studying the markets from a historical perspective, modern-day market action and events can be put into historical context. In The Little Book of Stock Market Cycles (Wiley; August 2012; $22.95; 978-1-1182-7011-0; Hardcover; Ebook), Hirsch, the pre-eminent authority on market cycles and seasonal patterns, presents the most effective indicators, patterns, and seasonalities over the nearly 50-year history of the Stock Trader’s Almanac.
Armed with the knowledge of how the market has performed in the past, investors will be better prepared to identify shifts in momentum that come at major market tops and bottoms. Hirsch points out that this is not an exact science as patterns and tendencies change and shift. For example, farming made August the best month of the year from 1900 to 1951, but now that less than 2 percent of the U.S. population farms, August is one of the worst months. “Once these cycles and patterns are firmly embedded in your investment and trading mentality, you must turn to factors on the ground in the present,” he says. “Use common sense, technical indicators, fundamentals, and contrary thinking.”
Demonstrating how the market behaves and how to incorporate it into any investment strategy, The Little Book of Stock Market Cycles covers:
The Meaning and History behind Bull and Bear Markets: Hirsch explores how to determine whether we are in a bull or bear market and the differences between cyclical and secular bear and bull markets. He explains how we have been in the midst of an overarching secular bear market since 2000 and when we can expect the next big secular bull that will get us out of this post-financial-crisis funk.
The Next Super Boom: Super booms of the past (characterized as a 500% increase in the stock market) were conceived during wartime and financial crisis with pent-up demand, elevated government spending, and mushrooming inflation; weaned on peace, political leadership, and effective governing; then fed a steady diet of cultural paradigm-shifting enabling technology that changed the world and the way the average person lived. Looking at the market’s behavior and global economic trends during the last three major boom-and-bust cycles of the 20th century revolving around World War I, WWII, and Vietnam, Hirsch expects the Dow to moves sideways until a major climb starts by 2020, with the Dow nearing toward 40,000 around 2025.
How the Presidential Election Cycle Impacts the Markets: Presidential elections have a profound impact on the economy and the stock market. Wars, recessions, and bear markets tend to start or occur in the first half a presidential term; with prosperous times and bull markets occurring in the latter half. The greatest gains can be noticed in the third years with weakness in the first two years.
Dow ($DJIA) Gains 9 Percent When Sitting President Runs: Jeffrey Hirsch Discuss How Markets Do Better When the Incumbent Party Retains the White House
The Presidential Election Stock Market Cycle: Jeffrey Hirsch Discusses How the Government Manipulates the Economy to Stay in Power
Best Six Months Switching Strategy: Investing in the Dow Jones Industrial Average between November 1st and April 30th each year and then switching into fixed income for the other six months has produced reliable returns with reduced risk since 1950.
January Indicators: January is host to many important events, indicators, and recurring market patterns. Day two of the month marks the end of the Santa Claus Rally, the “First Five Days” is our first glimpse at the trading environment for the coming year and a whole month gain or loss of the S&P 500 triggers the January Barometer. Devised by Yale Hirsch in 1972, the January Barometer has registered only seven major errors since 1950 for an 88.7 percent accuracy rate. This indicator adheres to the maximum that as goes the S&P in January, so goes the year.
In addition, In The Little Book of Stock Market Cycles examines:
- Financial panics and economic explosions of the 20th century
- How war, peace, and inflation has been the driving force in creating the cycle of booms and busts for the past two centuries
- How to time trades around options expiration dates
- Shorter term tendencies involving the best hours, days, weeks, and months of the year
- Trading around holidays and special occasions
- How to combine seasonal trading with market indicators to determine when to buy and sell
Incorporating meticulous historical research and market analysis to illustrate market cycles and what drives them, The Little Book of Stock Market Cycles presents time-tested cycle-based trading and investing strategies that can dramatically boost the ability to capture market-beating returns, year-in and year-out, through bull markets, bear markets, and everything in between.
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