The question of cycles came up among some investor friends. Do they exist?
Everyone has their own view on the matter but I, unequivocally, land in the 'yes' column. While I don't think they are perfectly symmetrical I do think they are clear. Rather than cycles, I prefer to think of it as rotation. We rotate (which is something most folks associate with a wheel or turning, hence circle) between trends, asset classes, sectors, risk levels, products, etc.
The problem is some folks demand symmetry or clear patterns as proof cycles (rotation) exists. If it were that clear and easy, then we'd all be rich.
I tend not to try to predict turns, rotations, or cycles. It's a tough game. If you get it right, you score big. If you're wrong, then you can get trapped in a position that continues to fall or not move. That's not a huge problem if you are willing to get out quickly, but if you exit, then what you sell runs, you risk getting crushed emotionally. You also risk the urge to stay in a position too long in the future anticipating a turn.
Instead, I'll skip the bottom calling and looking for a turn after it starts that resonates with me. Admittedly, I missed GameStop (GME) and the meme stocks because that didn't resonate with me like the 2020 summer SPAC brew. I could understand the appeal for SPACs, the structure around the warrants and the stocks, the limited floats, and the new coming public trend. This is also why I missed out on the dogecoin move. The logic wasn't there for me. You might have skipped out on those names as well. It doesn't make you or I dumb. It simply means those particular trades didn't fit our trade thesis and/or risk parameters.
While 2021 started out strong for me, I haven't been able to identify the rotations to a degree of comfort. The ones I've thought fit my profile have fizzled quickly. The end result after a strong first month of the year has been low single digit percentage gains in February, March and April, with April being my worst performing month at a gain of 1%. Needless to say, I underperformed the markets last month.
And I'm okay with that. Markets change. The best part is we, as traders and investors, can wait for our pitch. The thinking that there always has to be a trade or we need to outperform every day or every month is misguided. Unless you professionally manage assets, you're only competing with yourself, so don't put yourself at a disadvantage by adhering to misguided notions. Play your game. Wait for your pitch.