Scepticism
Despondency
Euphoria
Capitulation
Panic
Thrill
Depression
Excitement
Fear
Anxiety
Hope
1971
2020
You can't stop the wave, but you can learn to surf
Ride the wave
When things are great, we feel that nothing can stop us. And when things go bad, we look to take drastic action. Because emotions can be such a threat to an investor's financial health, it is important to know how to keep your head above water in the cycle of investor emotions.
Relief
Optimism
Denial
Optimism
to learn more about how it affects investment choices.
Point of maximum financial risk
Point of maximum financial opportunity
Optimism
Excitement
Relief
MARKET CYCLE #2
Aug 1984 - Aug 1987
+136%
• Credit boom
• Strong world economic growth
Excitement
Hope
Relief
Thrill
Optimism
When markets move in the direction we had hoped to see, we start to get excited about the possibility of even greater gains.
Excitement
Thrill
Optimism
Excitement
When the momentum continues, we find the experience thrilling and begin to anticipate even higher returns.
Thrill
Euphoria
Excitement
Euphoria
Anxiety
Euphoria
Anxiety
Denial
Thrill
Anxiety
Denial
As markets reach the top of the
cycle, investors may experience euphoria.
We start to think that we made a smart move to
invest when we did, and we believe that the good times
will continue unchecked.
We may even fool ourselves into believing we can tolerate higher levels of
risk - and may begin to trade more frequently or invest in riskier asset classes.
Euphoria
Denial
Thrill
Euphoria
Fear
Denial
As the markets continue to fall, denial gives way to fear. Investment values decline perhaps even to the point that we begin to see losses.
Reality sets in that maybe we weren’t
as smart as we thought.
Anxiety
Fear
Denial
Thrill
Anxiety
Euphoria
.
Denial
Anxiety
Euphoria
Depression
Anxiety
When market losses accelerate, real fear kicks in. Some investors may then turn defensive and switch out of riskier equities to more defensive equities or other asset classes such as bonds.
Fear
Depression
Anxiety
Capitulation
Panic
Fear
In the third phase of the cycle, the realities of a bear market come to the fore and an investor may become depressed and desperate.
Depression
Panic
Fear
Depression
Scepticism
Despondency
Many of us missed our chance to take
profits, and we may try to get our positions
back into the black by either selling our worst-
performing investments or moving into securities that
don’t fit our risk profile. When that doesn’t work, panic sets in.
Panic
Capitulation
Depression
Despondency
Panic
Hope
At this point, we feel at the mercy of the market and some of us pull out altogether, abandoning investments at precisely the wrong time.
Capitulation
Despondency
Panic
Capitulation
Scepticism
Panic
Those who remain invested may become despondent and wonder whether they should ever have invested their hard-earned money in the markets.
Despondency
Scepticism
Capitulation
Capitulation
Hope
Relief
In the fourth phase of the cycle, investors may experience some scepticism when markets start to rise. We often have a sense of caution or worry, wondering if market growth will last.
Scepticism
Hope
Despondency
Despondency
Relief
Capitulation
Optimism
Though investors are hopeful about continued market increases, they may still be reluctant to invest money - even at a point when prices are still relatively low and opportunities are attractive.
Hope
Relief
Scepticism
Despondency
Capitulation
Hope
Optimism
Eventually we come to realise the market is recovering. For those investors who
let their emotions rule their investment decisions, the market cycle can begin
all over again.
Relief
Optimism
Relief in past cycles
Hope
This is the point of maximum financial risk.
This is the point of maximum financial OPPORTUNITY.
Excitement
Excitement
Thrill
Scepticism
Relief
Hope
Panic
Despondency
Scepticism
Capitulation
Market cycle #1:
1971-1975
Market cycle #2:
1984-1989
Market cycle #3:
1997-2005
Market cycle #4:
2005-2015
+30%
MARKET CYCLE #1
Nov 1971 - Dec 1972
• Inflationary pressures, productivity improvements
• Rapid corporate earnings growth
• Introduction of paperless technology
+99%
MARKET CYCLE #3
Apr 1997 – Sep 2000
• Tech boom, investor exuberance
• Emergence of ‘new economy’ sectors
+28%
MARKET CYCLE #4
Jun 2005 – Jul 2007
• UK house prices hit highs
• Credit boom
• Higher interest rates
+55%
MARKET CYCLE #5
Jan 2015 – Dec 2019
• Return to full employment in U.S.
• Optimism rises with U.S. tax cuts
• Trade war creates volatility in 2018
• 2019 Fed rate cuts extend the cycle
-15%
MARKET CYCLE #1
Jan 1973 – Jan 1974
• OPEC Oil crisis – crude oil prices tripled, inflation
• Credit squeeze
• Property company failures
-2%
MARKET CYCLE #2
Sep 1987
• Irrational shareholder sentiment
• Peak of overinflated stock values vs historical PEs
-28%
MARKET CYCLE #3
Oct 2000 – Sep 2001
• Tech bubble burst
• September 11 terrorist attack
-17%
MARKET CYCLE #4
Aug 2007 – Sep 2008
• Credit crunch, sub-prime mortgage crisis, collateralised debt obligation (CDO) failures
• Lehman Brothers declares bankruptcy
-24%
MARKET CYCLE #1
Feb 1974 – Nov 1974
• Global recession
• Extended bear market
-28%
MARKET CYCLE #2
Oct 1987 – Nov 1987
• 1987 Global stock market crash
-22%
MARKET CYCLE #3
Mar 2002 – Feb 2003
• Reduced global economic growth forecasts
• Extended bear market
• Corporate accounting scandals
-37%
MARKET CYCLE #4
Oct 2008 – Feb 2009
• Global financial crisis
• European and U.S. recessions, negative real GDP reported for major developed countries in Q4 2008
+39%
MARKET CYCLE #1
Dec 1974 – Jun 1975
• Stock market recovery despite recession
+64%
MARKET CYCLE #2
Dec 1987 – Dec 1989
• Stock market recovery as value hunters sought to buy quality stocks cheaply
+52%
MARKET CYCLE #3
Mar 2003 – May 2005
• Geopolitical uncertainty
• Refocus on world economic fundamentals
• Boom in resources in response to industrialisation of China
+225%
MARKET CYCLE #4
Mar 2009 – Dec 2015
• Global stock market recovery
• Deleveraging, slow economic growth
Market cycle #5:
2015-2020
We've ridden these waves before
Investors have been optimistic in past market cycles
Investors have been excited in past market cycles
Investors have been thrilled in past market cycles
Investors have been euphoric in past market cycles
Investors have been in denial in past market cycles
Investors have been anxious in past market cycles
Investors have been depressed in past market cycles
Investors have been fearful in past market cycles
Investors have panicked in past market cycles
Investors have capitulated in past market cycles
Investors have been despondent in past market cycles
Investors have been sceptical in past market cycles
Investors have been hopeful in past market cycles
Investors have been relieved in past market cycles
Scepticism
Investors typically start with optimism, which sits
at the inflection point on the emotional upswing.
We commonly expect things to go our way, or
we expect to receive a return for the risk of
investing. We go into the markets because
we believe we will be able to grow our
wealth through our investment choices.
Excitement
Hope
Relief
Investors typically start with optimism, which sits at the inflection point on the emotional upswing.
Optimism
excitement
Relief
We commonly
expect things to
go our way, or we
expect to receive a
return for the risk of
investing. We go into
the markets because we believe we will be able to grow our wealth through
our investment choices.
Optimism
SURF'S UP
Excitement
Thrill
Euphoria
Denial
Anxiety
Fear
Depression
Panic
Capitulation
Despondency
Scepticism
Hope
Relief
Optimism
Thrill
When markets move in the direction we had hoped
to see, we start to get
excited about the
possibility of even
greater gains.
Excitement
thrill
optimism
Investors have been optimistic, excited, thrilled, and euphoric in past market cycles
BACK TO the CYCLE
Past cycles
BACK TO the CYCLE
Investors have been depressed, panicked, capitulating and despondent in past market cycles
Excitement
Euphoria
When the momentum continues, we find the experience thrilling
and begin to anticipate
even higher
returns.
Thrill
thrill
Excitement
Thrill
Denial
As markets reach
the top of the cycle, investors
may experience euphoria. We start to
think that we made a smart move to invest when we did, and we believe that the good times will continue unchecked. We may even fool ourselves into believing we can tolerate higher levels of risk–and may begin to trade more frequently or invest in riskier asset classes.
Euphoria
Denial
THrill
Euphoria
Anxiety
The second phase of the cycle occurs when the market starts to turn. At first, we watch to see if the downturn is just a blip. We may believe that things will improve
shortly and therefore
hang on to our
investments.
Denial
Anxiety
Euphoria
Denial
Fear
As the markets
continue to fall,
denial gives way to
anxiety. Investment values
decline perhaps even to the
point that we begin to see
losses. Reality sets in that
maybe we weren’t as smart as
we thought.
Anxiety
Fear
Denial
Depression
Anxiety
When market losses
accelerate, real fear
kicks in. Some investors
may then turn defensive
and switch out of riskier
equities to more defensive
equities or other asset classes
such as bonds.
Fear
Depression
Anxiety
Fear
Panic
In the third phase
of the cycle, the
realities of a bear
market come to the fore
and an investor may become depressed and desperate.
Depression
Panic
Fear
Depression
Capitulation
Many of us missed
our chance to take
profits, and we may try to
get our positions back into
the black by either selling our
worst-performing investments or
moving into securities that don’t fit our risk profile. When that doesn’t work, panic sets in.
Panic
Capitulation
Depression
Panic
Despondency
At this point, we feel at the mercy of the market and some of us pull out altogether, abandoning investments at precisely the wrong time.
Capitulation
despondency
panic
Capitulation
Scepticism
Those who remain invested may become despondent and wonder whether they should ever have invested their hard-earned money in the markets.
Despondency
Scepticism
Capitulation
Despondency
Hope
In the fourth stage of the cycle, investors may experience some scepticism when markets start to rise. They often have a sense of caution or worry, wondering if market growth will last.
Scepticism
Hope
Despondency
Scepticism
Relief
Though investors are hopeful about continued market increases, they may still be reluctant to invest money—
even at a point when
prices are still
relatively low and
opportunities
are attractive.
Hope
Relief
Scepticism
Hope
Optimism
Eventually we come to
realise that the market is
recovering. For those
investors who let their emotions
rule their investment decisions, the market cycle can begin all over again.
Relief
optimism
hope
Investors have been in denial, anxious, and fearful in past market cycles
BACK TO the CYCLE
The second phase of the cycle occurs when the market starts to turn. At first, we watch anxiously to see if the downturn is just a blip. We may believe that things will improve shortly and therefore hang on to our investments.
BACK TO the CYCLE
Investors have been sceptical, hopeful, and relieved in past
market cycles
Investors should consider how the combined risks impact their total investment portfolio and understand that different risks can lead to varying financial consequences, including loss of principal.
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IMPORTANT INFORMATION
This is the point of maximum financial OPPortunity.
Scepticism
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PAST CYCLES
Relief in past cycles
ScEPTICISM in past cycles
DESPONDENCY in past cycles
capitulation in past cycles
PANIC in past cycles
depression in past cycles
FEAR in past cycles
ANXIETY in past cycles
denial in past cycles
euphoria in past cycles
thrill in past cycles
Excitement in past cycles
optimiSM in past cycles
Emotions
Cycle of Investor Emotions
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MARKET CYCLE #5
Jan 2020 – Dec 2020
• Reports of a virus outbreak in Wuhan, China
• Small number of cases reported in Europe and North America by the end of January
• COVID-19 pandemic market crash
• Rebound despite lockdowns
• Tech surges on working from home shift
• Vaccine hopes
Back to emotions
Click on an emotion
to learn about historical market returns and to provide perspective about the emotions you're feeling now.
Hover on stages of past market cycles