Economics
Business Cycle
Economies do not grow in a straight line; they cycle. Activity expands until it overheats, then slows and often contracts before recovering and expanding again. These phases can last anywhere from a couple of years to a decade.
Each phase favors different parts of the market. Early recovery often rewards cyclical and small-cap stocks, while late cycle tends to favor defensives and quality as growth matures.
Understanding where the economy sits in the cycle helps investors anticipate which sectors capital is likely to rotate into next, a core idea behind positioning ahead of the crowd.
Example
Reading the business cycle helps explain why utilities may lead late in an expansion while technology leads early in a recovery.
Business Cycle — FAQ
What is Business Cycle?
The business cycle is the recurring pattern of expansion and contraction in economic activity, moving through phases of growth, peak, slowdown, and recovery.
Can you give an example of Business Cycle?
Reading the business cycle helps explain why utilities may lead late in an expansion while technology leads early in a recovery.
Understanding creates conviction.
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