[Summary]
"Markets are born in pessimism, grow in skepticism, mature in optimism, and die in euphoria" is a famous saying that describes market cycles.
When investor sentiment becomes too pessimistic, a future bull market may begin.
However, pessimism does not necessarily mean that you should buy.
What does it mean to be born in a pessimistic market?
This saying expresses the relationship between market appreciation and investor sentiment.
When the market is full of pessimism, stock prices may already have a lot of bad news priced in.
Then, as the bad news gradually subsides, the market begins to rise amid skepticism.
4 psychological stages
| stage | investor psychology | How to view market prices |
|---|---|---|
| pessimism | no one wants to buy | Bottoming out candidate |
| skepticism | I still can't believe it | Early rise |
| optimism | bullishness increases | mid to late rise |
| feeling of happiness | Everyone is bullish | Ceiling alert |
This saying teaches us that the market can move contrary to the mood of the news.
Points to note
Buying in a pessimistic market is not easy.
If the negative news is really serious, stock prices could fall even further.
What we want to confirm is whether the pessimism is too much, or whether business performance and the economy continue to deteriorate.
Summary
"Markets are born in pessimism" is a maxim for understanding investor psychology and market cycles.
Rather than being influenced by market trends, think about where you are: pessimism, skepticism, optimism, or happiness. The temperature of news and the position of stock prices may deviate.