Invest or conserve?  Buy or sell?  Stocks or bonds?  What if there was a principle that was as easy as telling time and reacting accordingly?  Luckily there is, and we call it the Economic Clock.  This article will examine the Economic Clock and explain how it can work for you in your investment strategies.

The Economic Clock is simply a graphic representation of the economic cycles within an economy. The idea is that if you know where the economy is at a given point in time, you can adjust your investments accordingly. This is why there are times when you want to buy stocks and other times when bonds are a better investment.

How to tell time with the Economic Clock:

Each hour denotes a specific time in the economy.  We’re going to examine each hour, and what it means for your financial well-being.  In order to use this information to your advantage, you need to be well versed with the economy and be able to accurately identify which part of the clock you are presently in.

12 O’Clock

Is identified as a boom in the economy.  Wages are increasing, morale is high amongst households and corporations, and politicians are spending.  Real estate values are also increasing, causing a major flux of cash to be changing hands.  Goods become overvalued, and spending is becoming exuberant.  This is a fantastic time to sell hard commodities like natural resources, and real estate.  If you purchase investments, you’ll be buying at a peak and will have to wait until the next revolution to potentially make a profit.  It is advisable to reduce your assets and increase your cash reserves.

1 O’Clock

Banks begin increasing interest rates to cut consumer spending in an effort to stave off inflation.  This is the prevailing slump that persists until 5 o’clock.

2 O’Clock

Share prices and bond rates begin to fall as investors increase their cash reserves in expectation of a failing economy.  Corporate earning tighten and some begin to file for protection or bankruptcy.

3 O’Clock

Commodity prices and indexes begin falling as production slows down across all markets.  It is advisable to increase your bond holdings as companies increase their interest rates in anticipation of issuing bonds to cover their operating costs through the impending recession.  3 o’clock is the typical slowing down of the economy, approaching a recession.

4 O’Clock

Foreign investment begins to slow as they wait for the domestic economy to recover.  Investment risk is high and reserves are decreasing.

5 O’Clock

Government, corporate, and household income becomes scarce.  Investors are holding onto cash instead of investing and spending.

6 O’Clock

Real estate becomes the biggest market indicator of recessionary woes.  Property values fall and investors are looking to scoop investments up.  This is a fantastic time to buy if you’ve got capital to spend.  By 12 O’clock, you will have made a healthy profit.

7 O’Clock

Banks are now cutting interest rates in an effort to stimulate consumer spending.  Mortgage rates are decreasing to encourage a resurgence in the economy.  If the economy fails to respond, it will fall into a deep recession.  When it begins to recover, the economy is turning upwards towards 8 o’clock.

8 O’Clock

Corporate share prices begin rising as the economy is growing and returning to prosperity.  This is a fantastic time to evaluate your portfolio and make slight adjustments as you approach 12 o’clock.  You want to increase your share allocation between 6 o’clock and 8 o’clock.

9 O’Clock

With corporate shares booming, commodities begin increasubg as demand increases.  Supply returns to normal and the economy is now recovering successfully.  This is a fantastic time to purchase property before the 10 and 11 o’clock booms.

10 O’Clock

Foreign investment increases as their reserves and general optimism also increases.  Affordable prices, moderate government spending, and consumer optimism is approaching its peak.

11 O’Clock

Money is freely flowing between investors, companies, and consumers.  Government is content and corporations are actively growing and developing before the 1 o’clock slump.

Conclusion

It is integral that you identify what part of the economy you are currently in to make wise investment decisions.  Otherwise, you may be investing for example at the 12 o’clock boom instead of the 5 or 6 o’clock gloom.  Too many investors fall victim to investing in the middle of a strong economy, only to lose a portion of their portfolio by 4 o’clock.  Be smart, do your homework, and invest wisely!

Tags: economic clock

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