MARKETS Markets · January 2026 · ~5 min
The pendulum of cycles and sentiment
Markets rarely rest at the "reasonable" middle. They behave more like a pendulum swinging between greed and fear, moving fastest through the center and lingering there least. Most people treat the middle as normal and the extremes as accidents.
A cycle is not a clock
Cycles repeat, but never on a fixed beat. They are driven by valuation, credit, sentiment and narrative — and when everyone believes "this time is different," the pendulum is usually near an extreme. The point of studying cycles is not to predict the date of the next turn, but to know which end you are standing on right now.
Trees don't grow to the sky, and holes aren't dug to the center of the earth.
Three observable signals
- The temperature of the narrative: from doubt to acceptance to euphoria, and finally to despair;
- The price of risk: at peak optimism, the premium between junk and quality is squeezed thinnest;
- Your own emotion: when you most want to chase in, it is usually already late.
The pendulum's value is a reminder: extremes never last, reversion to the middle is the only certain direction — only the timing is unknown.
Further: treat emotion as readable data, not an enemy — see Thinking in probabilities. When the pendulum reaches its limit, see how bubbles form and burst in Anatomy of a bubble.