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Cyclical Nature of Markets and Investing
The cyclical nature in investing and markets stems from pendulum swings where people get caught up in big swings. While energy markets are well known for their cyclicality, overall markets also exhibit cyclical patterns. Cyclical industries, like energy, are influenced by both supply and demand cycles. The depth and duration of the cyclical trend are determined by the time it takes for supply to adjust in response to changing demand. The demand aspect of cyclical industries is similar to the overall economy, while the supply side is what drives the lasting and deep cyclicality observed in these industries.