Skepticism
Despondency
Euphoria
Capitulation
Panic
Thrill
Depression
Excitement
Fear
Anxiety
Hope
1971
2026
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
Hover on stages of past market cycles to learn about historical market returns & to provide perspective about whichever emotion you're feeling now.
Click on an emotion 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
+119%
• 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
Skepticism
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
Skepticism
Panic
Those who remain invested may become despondent and wonder whether they should ever have invested their hard-earned money in the markets.
Despondency
Skepticism
Capitulation
Capitulation
Hope
Relief
In the fourth phase of the cycle, investors may experience some skepticism when markets start to rise. We often have a sense of caution or worry, wondering if market growth will last.
Skepticism
Hope
Despondency
Despondency
Relief
Capitulation
Optimism
Though investors are hopeful about continued market increases, we may still be reluctant to invest money—even at a point when prices are still relatively low and opportunities are attractive.
Hope
Relief
Skepticism
Despondency
Capitulation
Hope
Optimism
Eventually we come to realize 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
Skepticism
Relief
Hope
Panic
Despondency
Skepticism
Capitulation
Market cycle #1:
1971-1975
Market cycle #2:
1984-1989
Market cycle #3:
1997-2005
Market cycle #4:
2005-2014
+25%
MARKET CYCLE #1
Nov 1971 - Dec 1972
• Inflationary pressures. Productivity improvements.
• Rapid corporate earnings growth
• Introduction of paperless technology
+90%
MARKET CYCLE #3
Apr 1997 – Sep 2000
• Tech boom. Investor exuberance.
• Emergence of ‘new economy’ sectors
+22%
MARKET CYCLE #4
Jun 2005 – Jul 2007
• UK house prices hit highs
• Credit boom
• Higher interest rates
+60%
MARKET CYCLE #5
Nov 2014 – Dec 2018
• Unemployment rates falling.
• Economy normalises
• Profit margins elevated
-19%
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
-20%
MARKET CYCLE #4
Aug 2007 – Sep 2008
• Credit crunch. Sub-prime mortgage crisis.
• Collateralized 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
+36%
MARKET CYCLE #1
Dec 1974 – Jun 1975
• Stock market recovery despite recession
+53%
MARKET CYCLE #2
Dec 1987 – Dec 1989
• Stock market recovery as value hunters sought to buy quality stocks cheaply
+42%
MARKET CYCLE #3
Mar 2003 – May 2005
• Geopolitical uncertainty
• Refocus on world economic fundamentals
• Boom in resources in response to industrialization of China
+174%
MARKET CYCLE #4
Mar 2009 – Oct 2014
• Global stock market recovery
• Deleveraging, slow economic growth
Market cycle #5:
2015-2021
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 skeptical in past market cycles
Investors have been hopeful in past market cycles
Investors have been relieved in past market cycles
Skepticism
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.
SURF'S UP
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.
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PAST CYCLES
Relief in past cycles
SKEPTICISM 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
Late February 2020
• COVID-19 virus spreads worldwide
• Global stock markets fell late in February 2020 due to a significant rise in the number of COVID-19 cases outside of mainland China
-24%
MARKET CYCLE #5
February 2020 - March 2020
• COVID-19 is classified as a global pandemic
• Travel and commerce begins to be restricted worldwide as COVID-19 pandemic eventually forces most of the world population into quarantine.
+46%
MARKET CYCLE #5
Mar 2020 - Oct 2020
• COVID-19 pandemic
• Global stock market recovery
• 23rd March market rebound
Market cycle #6:
2021-2023
+46%
MARKET CYCLE #6
Oct 2020 - Dec 2021
• Early stage of economic recovery
• COVID vaccine roll out
• Continued policy support
0%
MARKET CYCLE #6
Jan 2022 - Dec 2023
• Stubbornly high inflation
• Very rapid interest rate increases lead to
recession worries
-8%
Market cycle #7:
2024-2025
+43.5%
MARKET CYCLE #7
Jan 2024 - Dec 2025
• Interest rates fall in developed world
• AI capital expenditure drives markets higher
• Global economic growth remains resilient