The Economic Clock first appeared in 1937 in England, and is sometimes known as the investment clock.
Many of us think in pictures; the clock is a visual or pictorial overview of the economic cycle. The clock gives you a bit of a rough guide as to where perhaps things will be going well and not so well, so, you can therefore take advantage of the different assets performing at different times.
Each asset class has different characteristics and they can perform well at the same time, but if that were the case, why wouldn’t you go for the one that performs the best? That is the problem, the asset classes might all go in the same direction, but they may not perform well at the same time. It’s the correlation of the benchmarking of the assets, and similarly all assets can perform poorly at the same time.
When asked to comment Nick Stratus of Solid Financial Advisors said “I would never rely simply on a property or investment clock, because it can be all too simplistic”.
Investors use the clock as a tool to better understand where the economy is currently sitting, where it is heading and, in relation, when it is a good time to invest. However, when you look at the investment clock, it isn’t uncommon to find that the opposite has actually occurred. We are far more global than we have ever been before and there are far more complicated inter-relationships and associated climates that make the clock today; it assumes that everything works in a particular way, when the reality can be that the clock is in fact working in opposing tandems.
Essentially, The Economic Clock is a very rough guide of where we are in the investment cycles. There are some base facts, like interest rates, which can give you a feel of where the economy is going and this can provide the possible expectations of where the market is most likely to deliver.
Solid Financial Advisors – August 2015