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FOR EDUCATION ONLY

https://youtube.com/watch?v=Was1osbybgI

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The video is easy to follow as a harbinger of a stock market crash.

The article will cover financial definitions as cyclical stocks and margin debt, and stock index rotation.

Cyclical Stocks

• Cyclical stocks are those whose value surges up and down in conjunction with the broader economy.
• They are also known as offensive stocks because investors can use them to reap big returns when the market swings upward.
• It’s important to balance cyclical investments with noncyclical ones that will remain steady regardless of the state of the economy.

Examples of companies whose stocks are cyclical include car manufacturers, airlines, furniture retailers, clothing stores, hotels and restaurants. When the economy is doing well, people can afford to buy new cars, upgrade their homes, shop and travel.

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Margin Debt

• Margin debt is the sum of money that investors borrow from the brokerage through the margin account.
• Investors can use the margin debt to buy securities or short sell stocks.
• The initial set margin debt that the investor can borrow is 50% of the total account balance.

The reason you need to open a margin account to short sell stocks is basically selling something you do not own.

A margin call is the broker’s demand that an investor deposit additional money or securities so that the account is brought up to the minimum value, known as the maintenance margin. A broker is under no obligation to give you time to meet a margin call. It does not have to consult you before liquidating assets in your account to cover any margin debt.

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Let us compare the performance of major stock indexes in a time series: last year, quarter and month.

Year

DOW ————————- 11.4

S&P ————————— 16.3

NASDQ ———————- 4.6

Russel 2000 ———— (5.5)

Quarter

DOW ———————— (2.5)

S&P ————————– (1.5)

NASDQ ——————– (7.0)

Russel 2000 ———- (11.9)

Month

DOW ———————— (2.2)

S&P ————————– (3.6)

NASDQ ——————– (7.7)

Russel 2000 ———— (8.1)

Each period ends on January 20, 2022.

The indexes may continue negative (losses) in the immediate future.

To invest in Inverse Mutual Funds and ETFs, the NASDQ may be the best option in the immediate future.

The NASDAQ gained 4.6% and the Russel 2000 lost 11.9% for the year.

The NASDAQ is the index with the most negative momentum,

during quarterly and monthly performance.

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During a market decline Russel 2000, small companies, declines first,

then the NASDQ followed by the S&P500, and finally, the DOW.

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