The most costly part of investing is not what you don't know but what you know for sure that isn't right.

We may not know what lies ahead in the future, but we must know where we are today.

This is the story of a contrarian mindset, exemplified by a friend who is always pessimistic. In early 2023, she asked me, "Why are you so optimistic that the economy is getting better when everyone is talking about a recession? Many factories are laying off workers, and people are very pessimistic about the outlook." I replied, "That's exactly why it's a good time to invest. Most things have proven to be cyclical; they will come back." Fast forward to now, we are seeing improvement.

It's normal for people to believe the current situation will persist indefinitely. This anticipation and expectation create what we call cycles. During periods of optimism, everyone believes good times will continue. Greed drives rapid expansion, which can lead to excessive manufacturing capacity. When demand falls short of the expectations that fueled the expansion, factories may close, workers may be laid off, and inventories may decrease. These factors contribute to below-average growth or even recession. No one wants to commit capital under these conditions, as prices hit bottom just when people are most depressed and cautious. This is when the market bottoms out, a new cycle begins, asset prices are low, prospective returns are high, and risks are low.

While history doesn't repeat itself, it does rhyme. The specifics of each cycle differ in amplitude, speed, power, and duration, as do their causes and effects. However, certain underlying themes do recur. Human psychology often swings between extreme pessimism and extreme optimism. To be exceptional in the market, you must dare to be different, think inversely, and sometimes go against the crowd. But remember, as Keynes once said, "Markets can stay irrational longer than you can stay solvent." So, be cautious and flexible as market conditions evolve. We may not know what the future holds, but we must understand where we are today to prepare for what lies ahead. So, where are we now in the cycle of Malaysia stock market? Let's delve in.