How to grasp the trend through cycles?

Cycles are divided into large cycles and small cycles.

1. Large cycles

The large cycle mainly includes the monetary policies of the Federal Reserve, such as interest rate hikes and interest rate cuts. These policies determine the loose or tight state of the currency, thereby affecting the overall market trend.

2. Small cycles

The small cycle focuses on the specific stages of the interest rate hike cycle, such as the early, middle or end, and whether it enters the pause stage or its end.

Historical data shows:

Initial interest rate hike: In the entire risk market, whether it is cryptocurrency or US stocks, the initial interest rate hike usually poses a destructive blow to the market, leading to a decline.

End of interest rate hike: When the interest rate hike cycle is nearing its end, the risk market tends to rise.

Pause of interest rate hike cycle: Pausing interest rate hikes is usually beneficial to the risk market, which is a positive signal from a general perspective.

Operation strategy:

Initial interest rate hike: It is recommended to sell assets because the market usually falls.

Bottom of interest rate hike: When it is predicted that it will enter the pause stage of interest rate hike, you can consider buying.

Early stage of rate cut: If there is no recession in the early stage of rate cut, continue to hold positions;

If there is a recession, sell assets.

Although this strategy cannot accurately predict the market top, it can capture about 70% of the gains in the rising cycle with low risk.

Mid-term election cycle:

Before the mid-term election: Historical data shows that investors should consider buying when the market falls before the mid-term election, because the market usually performs better after the election.

This trend has occurred in 14 of the past 15 election cycles, indicating that the market after the mid-term election may have a profit margin of 40%-50%.

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Summary:

By analyzing the monetary policy of the large cycle and the interest rate hike stage of the small cycle, you can better grasp the market trend. Using these cyclical strategies, although it is not possible to accurately escape the top, it can effectively capture most of the market's gains and manage risks.

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