This is one of the most popular phrases in the world of trading and investing, and not without a reason.
There are those who see this reality of the Stock Market in an evolutionary way, so to speak always bullish.
This is the most logical way to see it since it goes hand in hand with the trend of this cosmos, following, in some way, Darwin’s evolution theory.
Normally people do not think in term of cycles, at least not beyond seasons or day and night.
Others, however, see the reality as a cyclical process in a way that all things have their beginning, maturity, eldership and death.
A classic exponent of this world view, much less popular, is the German author Oswald Spengler, with his known work “Decay of the West”.
This cyclical view does not mean that there is not a great trend or “evolution” but that inside these big trends, which can last thousands of years, there are uncountable cyclical corrections.
What is more, concerning this point of view, “evolution” would be actually a cycle inside an even greater cycle.
If you have a notion of what manvantaras and pralayas are you can perhaps get some idea.
The cyclical processes happen also in the stock markets, which are rising since 300 years ago, though it does not mean that it rises forever.
The most normal is that it has bullish and bearish phases and that the former tends to surpass the latter.
What usually occurs in the global financial markets is that great winning streaks are followed by times of crisis.
In particular stocks things are more confused since there can be individual issues.
The cyclic view applies more to the general market notion.
Peter Schiff and past performances
Peter Schiff wrote an article in which he confessed that his strategy during the second decade of the 2000’s did not work well, due to his strong position in gold and commodities.
| 1997/2000 | 2001/2007 | 2011/2014 | |
| Nasdaq | 187 | -13 | 93 |
| S&P500 | 78 | 11 | 64 |
| DAX | 129 | 27 | 40 |
| India | 57 | 393 | 25 |
| Mexico | 39 | 309 | -3 |
| Brasil | -4 | 407 | -51 |
| Australia | -8 | 213 | -9 |
| Chile | -20 | 198 | -46 |
| Hong Kong | -26 | 82 | 12 |
| MSCI emerging | -30 | 140 | -17 |
| Indonesia | -50 | 745 | 36 |
| Gold miners | -65 | 512 | -70 |
In the article Schiff says that he would have better done some sort of cyclical investing and that his long-term position against the dollar was detrimental.
Using some data Schiff tells us how some of the main world markets behaved from 1997 to 2014.
As we can see during the last years of the Nasdaq bubble that stock index was the one with better returns.
As you can see during 1997 to 2000 emerging markets suffered terrible bear markets. However, during 2001 to 2007 these stocks and the Gold Miners – another underperformer during the previous period – had huge returns.
From 2011 to 2014 it was again the stocks which had better returns, specially Nasdaq, S&P500 and the DAX.
Again, the better assets during the previous period, emerging markets and gold miners had a terrible performance.
I have to mention that these results are in dollars so some foreign data may seem confusing.
As we can see stock markets that had big collapses like Nasdaq in 2000 or Asia in 1998, or Europe in 2007 deliver great returns afterwards.
Although, we should never forget the cases of Greece, Cypruss or Iceland where the stock markets never really recovered. Not to mention cases like Venezuela.
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