Stock Market Gravity — What is Stock Market Gravity?
Unless you look at the world through a different prism, you simply do not know there is such a thing as stock market gravity. You’ve heard of gravity and what it does to objects but you never knew such a thing as stock market gravity existed.
You of course know gravity means that when you drop something it will fall to the ground. You don’t have to believe it you can try for it for yourself. Hold a brick over your foot and drop the brick. About one-tenth of a second later you will be yelling ouch or words to that effect.
Does that mean it works the same way in the stock market? Interestingly enough the answer is no. The stock market gravity is actually in a different direction. It points toward growth.
Yes, I know all the gurus on television and in the other media, provide commentary, charts, videos and other eye wash to show us how the market is going down or hiccupping and causing downward trends.
The plain everyday facts tell us stock market gravity is to move up. While this sounds completely backwards from the scientific definition of gravity maybe we should look at and see if it really isn’t the same.
Companies actually have no other to move than up. You can call it their natural progression. However, should an opposing force step in front of them, the possibility exists they will change their course.
If you stop and ponder about a company’s natural progression, you undoubtedly will come to the conclusion that growth is the most natural thing in the world for almost all companies. If that is true, stock market gravity has to follow suit.
Growth doesn’t happen by itself. It rests in the human condition called bettering one’s self. If it wasn’t for the desire to do things better we would be still riding in buggies pulled by horses and crossing the ocean in ships with sails.
Our desire to “better” ourselves and our human condition results in improvements in productivity and our standard of living. This leads to greater economic activity. Greater economic activity could be described as higher profits.
Given all this is true, stock market gravity is, by inherent nature, always pointed upwards. As investors, if we choose to invest in stocks, aren’t we looking for profit growth?
If you come up with an answer other than yes, please tell me and provide an explanation. If we aren’t looking for growth, hence higher profits, why invest in the first place?
Does this mean the good times will last forever and the market will always rise? Obviously not since history has shown us some real tough economic times. The market has gone through a number of boom and bust cycles.
Fortunately for stock investors, the bad times during a US recession only last about 13 months. The stock market gravity is definitely in a downward spike but it doesn’t last too long. The boom time for stock market gravity is approximately 60 months. That is almost a five to one ratio.
What does all this stock market gravity talk actually mean? It means if you recognize the market is in an upward spike, you can take advantage of it and put yourself in a comfortable profit situation.
When the stock market gravity turns and slides downward, and you recognize it, you can still profit albeit with a different set of investment vehicles but you can still profit.
This little article on stock market gravity was meant to get your brain twisting and turning over the dynamics of the market. Consider it as your personal aide to recognizing market characteristics.
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