Market Rules to Remember
Bob Farrell | |
|---|---|
| Born | Robert J. Farrell |
| Occupation(s) | Chief Market Analyst, Merrill Lynch |
| Years active | 1957–1992 |
| Known for | Market Rules to Remember, equity market forecasting |
Market Rules to Remember comprises ten essential guidelines for investors, authored in 1998 by Bob Farrell, the former Chief Market Analyst at Merrill Lynch. These principles have become staples on Wall Street and are frequently referenced in prominent financial advisory literature.
Background
Robert "Bob" J. Farrell earned his master's degree in investment finance from Columbia University in 1955, where he studied under the renowned Benjamin Graham. After completing two years of service in the US Army, he began his career at Merrill Lynch in 1957. Farrell was promoted to Chief Market Analyst (CMA) in 1967, a position he maintained for more than 25 years until his retirement in 1992 at age 60. During 16 out of his final 17 years as CMA, he was recognized by Institutional Investor as the leading equity market forecaster in the United States and was inducted into their "Hall of Fame."
A trailblazer in technical analysis, Farrell was among the earliest to apply "sentiment analysis" in predicting market trends. In 1970, he became the inaugural president of the organization that later developed into the CMT Association. After stepping down from his CMA role, Farrell remained with Merrill Lynch as a senior investment officer, regularly issuing reports for clients.
In September 1998, near the height of the dot-com bubble, Farrell shared his "Market Rules to Remember" on the reverse side of a client report. Though initially unnoticed, these rules gained widespread attention when Merrill Lynch’s chief North American economist David Rosenberg republished them in 2003 following the dot-com collapse. Since then, they have become a frequent reference point for financial advisors and investors alike.
Rules
In 1998, Farrell presented his "Market Rules to Remember":[1][2]<ref name=GM>
- Rule #4. "Exponentially rising or falling markets typically extend beyond expectations but do not correct by moving sideways".[1][2]
- Rule #7. "Markets exhibit strength when broad-based and weakness when limited to a few blue-chip stocks".[1][2]
- Rule #8. "Bear markets unfold in three phases — a sharp decline, a reflexive rally, followed by a prolonged fundamental downtrend".[1][2]
- Rule #9. "When consensus among experts and forecasts is unanimous — an unexpected outcome is likely".[1][2]
Legacy
According to CNBC in 2020, Farrell’s investing guidelines continue to be widely cited.[2] In 2021, Morgan Stanley informed clients that these rules are “displayed prominently by market professionals globally,” with over 300 million Google search results for “10 Market Rules to Remember.”[1] By 2022, Bank of America underscored their ongoing significance amid inflationary pressures and fluctuating interest rates.[3] Beyond Wall Street, India's The Economic Times noted these principles remain actively applied during periods of market volatility.Cite error: The opening <ref> tag is malformed or has a bad name
See also
External links
- Bob Farrell’s "Ten Market Rules to Remember" and Their Contemporary Significance, Bank of America Securities (2022)
- In-Depth Review of Bob Farrell’s Market Rules, Morgan Stanley (2021)
- Ten Essential Guidelines for Equity Investors, Larissa Fernand (Morningstar, Inc., 2022)
- Bob Farrell, Merrill Lynch Markets Head, Grant's Interest Rate Observer (2019)
- Graphical Representation of Bob Farrell’s 10 Market Rules, Lance Roberts (Business Insider, 2013)
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