Astute market observers understand that the economic and stock market cycles are related but not the same. The stock market has a cycle that tends to lead or lag the economic cycle.
In a strong economy, stocks have a bullish trend with occasional pullbacks within that trend. Every dip can be bought, and penalties for doing so are the exception rather than the rule. More speculative stocks tend to do well as investors try to place capital ahead of future growth industries, which is one of the trading strategies we focus on using the BAN - Best Asset Now newsletter.Economic conditions eventually weaken for any number of reasons.
An optional part of this monetary policy is for the Fed to purchase distressed assets. In an extreme economic stumble, governments may step in with fiscal policy measures like direct stimulus and institutional bailouts. Eventually, the economy recovers. But there is also the risk of overstimulating the economy.When the economy is running"too hot," high demand is chasing too little supply. And that, of course, leads to inflation in the prices of goods and services.