In our weekly insights two weeks back, we had spoken about the importance of identifying cycles and why markets operate in cycles. Today, we go deeper into the importance of cycles and an understanding of both US and Global markets – as to why a style that works well in one decade, typically tends to be in the last quartile of performance in the subsequent decade.
Size, style and regional leadership tend to alternate on a decadal basis and understanding these cycles plays an important role in positioning portfolios (Figure 1,2 and 3 explains the cycles contextually)
Fig 1 : Decadal IRR across large and small caps oscillates in cycles
Fig 2: Decadal returns across Geographies also follows cycles
Fig 3: Decadal annualized returns across regions shown below
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