PSYCHOLOGY OF A MARKET CYCLE : BIST XU100 2020-2023After a bull-market cycle, fueled by Turkiye Central Bank liquidity and Turkiye Wealth Fund assets, politicians and media were touting the continuation of the bull market indefinitely into the future.
It is understandable why mainstream analysis believed the markets could only go higher as there are many signs suggesting the current Wyckoff cycle has entered into its third stage - the distribution phase gained traction.
But Turkiye is experiencing an natural disaster that affects people psychologically and emotionally, leading them to think differently, act differently, and alter the way they make decisions—including economic decisions. In that sense, the psychological impacts of earthquakes may continue to have profound economic impacts long after reconstruction is finished.
The Wyckoff cycle has entered into its fourth, and final stage. Whether, or not, the current distribution phase is complete, is the question we are all working on answering now.
There is a sizable contingent of turkish investors, today who have never been through a real bear market having three stages:
1. Start with a sharp and swift decline.
2. After this decline, there is an oversold bounce that retraces a portion of that decline.
3. The longer-term decline then continues, at a slower and more grinding pace, as the fundamentals deteriorate.
While there is a less of “hope” the Turkish Central Bank’s flood of liquidity can arrest the market decline, there is still a tremendous amount of economic damage to contend with over the months to come.
In the end, it does not matter if you are “bullish” or “bearish.” What matters, in terms of achieving long-term investment success, is not necessarily being “right” during the first half of the cycle, but by not being “wrong” during the second half.
