Economic Clock – What is it?

It is commonly said that the economy functions in cycles. The Economic Clock visualises this movement to show when would be a good time to purchase certain types of investment, and when it would be unwise to do so.

Although it can be difficult to receive a straightforward answer from these types of general and simplistic “rules of thumb,” they can direct you towards shredded evidence from the past regarding what is going to happen in the future!

The “Clock” can be tricky to navigate when considering the regionalised nature of many communities. For example, the growth of business or real estate in Sydney or Melbourne differs greatly from that of Dubbo or Boggabri. Then there are areas, such as Hunter Valley, that can experience a boom or bust depending on the mining industry.

Explaining the Clock

Economic Clock

The economic clock is a reliable economic indicator that was created by academics in the UK during the late 1950s’. It is a concise representation of an economic cycle that is made up of different individual cycles. Although each of the individual cycles are closely related, they do go through changes in both phase and amplitude between cycles. These “shifts” are what cause each cycle to be different from the last.

12:00 – This is the high point of the economic summer season. This is a time of economic prosperity and consumers are confident. The economy has a lot of investment. The interest rate is rising, this is the peak of the economy. This is referred to as an economic boom.

3:00 – It is autumn, which denotes the change from summer to winter. monetarily, we see a decrease in stock prices, commodity prices, and looser monetary policy, while cash becomes less available in the economy.

6:00 – The economy is in a state of Winter. Investor confidence is low and many are choosing to sit on the sidelines. Business bankruptcies are at a high and people are losing their jobs.

9:00 – It’s Spring. The economy is on the rebound. There is an overall recovery in the economy. Consumer confidence is beginning to rise and monetary easing has started, injecting liquidity into the economy.

12:00 – 3:00 – The value of real estate is decreasing and the economy is slowing down.

5:00 – The number of small business bankruptcies is increasing and the number of job losses is rising.

3:00 – 6:00 – The unemployment rate, the contraction of world economies, and the recession.

4:00 – 6:00 – The stocks enter a bear market

6:00 – Deep recession

6:00 – 9:00 –  Recovery

7:00 – Banks promote fluidity 

10:00 – The increased building, development, and buying of lands

11:00 – Easy money

9:00 – 12:00 – Economy booms

6:30 Increase stock share ownership

9:00 Increase property ownership and reduce bonds

12:00 Reduce stock share ownership, increase cash reserves

3:30 Increase property ownership

3:00 – 6:00 Acquire businesses. Increase profits and exit at 11:00. Use the money at 3:00 to buy businesses that fail due to poor management

9:00 – 11:00 Fix your bank interest rate. 

Between 12:00 – 1:00, interest rate increases, refinance and fix interest rate.

11:00 Revalue your property and draw down credit (if needed). Use the credit at a favorable interest rate to fund purchases at a later time during distress.

How to invest in an Economic Summer?

As a business owner, you ought to reduce your expenses for the forthcoming autumn. Reduce your spending and organise your credit cards.

You need to have cash on hand to tide you over during difficult times. If you’re a property investor, you should be selling properties instead of buying them as it’s a seller’s market.

The current state of the property market is irrational; there is more demand than there is supply. When it seems like everyone is becoming a property agent and talking about properties, it’s time to get out of the market.

How to invest in an Economic Winter?

This is the redistribution of wealth from those who are financially illiterate to those who are financially savvy.

Itt is crucial that you capture market share between the hours of 3:00 and 6:00. If you do not have enough liquid capital, your business will not make it through the winter. This is when you can buy other businesses or take them over.

As a property investor, you ought to purchase as much as possible during winter. The cash you save during summer will enable you to buy properties at a discounted price; it is currently a buyer’s market.

Those with the means can take advantage of these excellent deals.

Are there steps you can do further?

You may want to buy new properties or do some other investment, but are quite unsure about your next steps. 

BloomWealth is a team of trusted and highly-skilled financial planners based in Sydney.

We can help you take control of your financial future and fulfil your true potential. Get in touch with us to ensure you are equipped with everything you need to make informed financial planning decisions.

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