It is virtually impossible to pinpoint the bottom of a slow market or the top of a hot one until after it has happened. However investors that buy stocks in companies that do well in growing economies, and they buy them at the right time, are able to profit from their wise decisions. One of the characteristics of an expanding company is their ability to raise their prices as the demand for their products or services grows. Raising prices means more profits for the company and increased dividends and higher stock prices for its investors.
Because no economic cycle will exactly repeat an earlier one, it is impossible to predict with any degree of accuracy just what will happen in a growth or recovery period. Since only some companies do poorly in a slump, it is hard to determine which company’s will take the biggest hits, or find it harder to recover. the underlying strength of any company is probably as important to its performance as the state of the economy.
The stock market moves up and down in recurring cycles, gaining ground for a period of time and then it reverses and falls for a period of time, before it rises again. Generally the market has to drop 15% before it is considered a bear. Sometimes market trend can last years. Overall though, bull markets tend to last longer than bear markets. This dose not mean that markets rise farther than they fall. It just means that drops in the market tend to happen quickly, while rises tend to take along time.
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