Sir John Templeton said: “Bull markets are born on pessimism, grown on skepticism, mature on optimism, and die on euphoria.”
Pessimism:
Following the 2008 crisis, the global economy was engulfed in a cloud of pessimism. Investors were gripped by fear and uncertainty as financial institutions crumbled, economies contracted, and unemployment soared. Stock markets experienced significant declines, and investors became cautious, bracing themselves for further turbulence. This initial stage of pessimism laid the foundation for the birth of a new bull market.
Skepticism:
As the dust settled and economies started to stabilize, skepticism took hold. Investors remained cautious, wary of another downturn and skeptical about the sustainability of the recovery. However, as central banks and governments implemented unprecedented monetary and fiscal stimulus measures QE1,2 & 3, confidence began to slowly seep back into the markets. Gradually, investors started to see signs of improvement, albeit with a sense of skepticism.
Optimism:
The bull market gained momentum as skepticism transformed into optimism. Economic indicators started showing signs of recovery, corporate earnings improved, and investor sentiment shifted towards a more positive outlook. This stage witnessed increased buying activity, as investors sought to capitalize on the upward momentum. As the market continued to rally, optimism became the prevailing sentiment, driving prices higher.
Euphoria:
The final stage of a bull market is characterized by euphoria, a state of extreme excitement and irrational exuberance. During this phase, investors become overly optimistic, disregarding potential risks and buying into the market frenzy. This euphoria is often fueled by widespread media coverage and the fear of missing out (FOMO). In this stage, valuations may become detached from underlying fundamentals, leading to excessive speculation and a heightened risk of a market correction.
Conclusion:
Since the last cycle low established during the 2008 crisis, we have witnessed the birth and evolution of a remarkable bull market. From the depths of pessimism and fear, it grew through skepticism and optimism, ultimately reaching a state of euphoria. It is essential for investors to recognize these stages and exercise caution, especially during the euphoric phase when markets may be prone to excessive speculation and unsustainable valuations. While bull markets provide ample opportunities for wealth creation, it is crucial to remain vigilant and focus on long-term investment strategies that align with underlying fundamentals. By understanding the cyclical nature of bull markets, investors can navigate the ever-changing landscape of financial markets with greater confidence and resilience.
Reference of Nasdaq:
E-mini Nasdaq-100 & Opt
Minimum fluctuation
0.25 index points = $5.00
Micro E-mini Nasdaq-100 Index & Opt
Minimum fluctuation
0.25 index points = $0.50
Disclaimer:
• What presented here is not a recommendation, please consult your licensed broker.
• Our mission is to create lateral thinking skills for every investor and trader, knowing when to take a calculated risk with market uncertainty and a bolder risk when opportunity arises.
CME Real-time Market Data help identify trading set-ups in real-time and express my market views. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com/cme/
Pessimism:
Following the 2008 crisis, the global economy was engulfed in a cloud of pessimism. Investors were gripped by fear and uncertainty as financial institutions crumbled, economies contracted, and unemployment soared. Stock markets experienced significant declines, and investors became cautious, bracing themselves for further turbulence. This initial stage of pessimism laid the foundation for the birth of a new bull market.
Skepticism:
As the dust settled and economies started to stabilize, skepticism took hold. Investors remained cautious, wary of another downturn and skeptical about the sustainability of the recovery. However, as central banks and governments implemented unprecedented monetary and fiscal stimulus measures QE1,2 & 3, confidence began to slowly seep back into the markets. Gradually, investors started to see signs of improvement, albeit with a sense of skepticism.
Optimism:
The bull market gained momentum as skepticism transformed into optimism. Economic indicators started showing signs of recovery, corporate earnings improved, and investor sentiment shifted towards a more positive outlook. This stage witnessed increased buying activity, as investors sought to capitalize on the upward momentum. As the market continued to rally, optimism became the prevailing sentiment, driving prices higher.
Euphoria:
The final stage of a bull market is characterized by euphoria, a state of extreme excitement and irrational exuberance. During this phase, investors become overly optimistic, disregarding potential risks and buying into the market frenzy. This euphoria is often fueled by widespread media coverage and the fear of missing out (FOMO). In this stage, valuations may become detached from underlying fundamentals, leading to excessive speculation and a heightened risk of a market correction.
Conclusion:
Since the last cycle low established during the 2008 crisis, we have witnessed the birth and evolution of a remarkable bull market. From the depths of pessimism and fear, it grew through skepticism and optimism, ultimately reaching a state of euphoria. It is essential for investors to recognize these stages and exercise caution, especially during the euphoric phase when markets may be prone to excessive speculation and unsustainable valuations. While bull markets provide ample opportunities for wealth creation, it is crucial to remain vigilant and focus on long-term investment strategies that align with underlying fundamentals. By understanding the cyclical nature of bull markets, investors can navigate the ever-changing landscape of financial markets with greater confidence and resilience.
Reference of Nasdaq:
E-mini Nasdaq-100 & Opt
Minimum fluctuation
0.25 index points = $5.00
Micro E-mini Nasdaq-100 Index & Opt
Minimum fluctuation
0.25 index points = $0.50
Disclaimer:
• What presented here is not a recommendation, please consult your licensed broker.
• Our mission is to create lateral thinking skills for every investor and trader, knowing when to take a calculated risk with market uncertainty and a bolder risk when opportunity arises.
CME Real-time Market Data help identify trading set-ups in real-time and express my market views. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com/cme/
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