Epstein & Kolacz Financial Advisors

(972) 771-9411

The Business Cycle

Tip: Not Smooth. During both recessions and expansions, the economy can go through brief reversals in economic activity. A recession may include a short period of expansion followed by further decline; an expansion may include a short period of contraction followed by further growth.
Source: National Bureau of Economic Research, 2017

What has upswings and downturns, troughs, peaks, and plateaus? Though such terms could easily describe a roller coaster ride, in fact they are commonly used to refer to something known as the business cycle.

The business cycle — also known as the economic cycle — refers to fluctuations in economic activity over several months or years. Tracking the cycle helps professionals make forecasts about the direction of the economy. The National Bureau of Economic Research makes official declarations about the economic cycle, based on factors such as the growth of the gross domestic product, household income, and employment rates.

Recovery & Recession

Business Cycle

An upswing, or recovery, occurs when the economic indicators improve over time. A recession occurs when the same indicators go through a contraction. A particularly long or severe recession is referred to as a depression.

Despite being called a cycle, it’s important to understand that the business cycle is not regular. It doesn’t happen at set intervals. Some recoveries have lasted several years while others are measured in months. Recessions, too, can last for a number of years or be as short as a few months.

Moving in Waves

The economic cycle moves through periods of recession and recovery. Despite being called a cycle, it’s important to understand that the economic cycle is not regular.

Wave Chart

Stages of Cycle

Fast Fact: Who Says? The peaks and troughs of the economic cycle are reported by the National Bureau of Economic Research, a private, nonprofit, nonpartisan research organization. Their website is nber.org.

So how should investors look at information about the business cycle?

Investors who understand that the economy moves through periods of recovery and recession may have a better perspective on the overall cycle. During recovery, understanding whether the economy is at an early or late stage of the cycle may influence certain investment decisions. Conversely, during a recession, deciphering whether the economy is passing through a shallow or deep cycle also may influence certain decisions.

Generally, the business cycle will transition from recovery to recession — and recession to recovery — over several months. Understanding that the economy travels through cycles may help you put current business conditions in better perspective.

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright 2019 FMG Suite.

Share |

Free Retirement Guide

It's never too soon to start preparing for retirement. But do you know what to look out for? Download our free ebook, "Retire Happy: A Simple Guide to Your Next Big Adventure."



Thank you! Oops!
 

Related Content

Events on Wall Street

Events on Wall Street

Can successful investors predict changes in the markets? Some can but others miss the market’s signals.

Investing with Your Heart

Investing with Your Heart

For some, the social impact of investing is just as important as the return, perhaps more important.

Keys to Investing for Retirement

Keys to Investing for Retirement

There are some key concepts to understand when investing for retirement.

 

Have A Question About This Topic?







Thank you! Oops!

All Muni Bonds Are Not Created Equal

Gaining a better understanding of municipal bonds makes more sense than ever.

The Business Cycle

Understanding the economy's cycles can help put current business conditions in better perspective.

Types of Stock Market Analysis

Most stock market analysis falls into three broad groups: Fundamental, technical, and sentimental. Here’s a look at each.

View all articles

What Is the Dividend Yield?

This calculator helps determine your pre-tax and after-tax dividend yield on a particular stock.

Taxable vs. Tax-Deferred Savings

Use this calculator to compare the future value of investments with different tax consequences.

Saving for College

This calculator can help you estimate how much you should be saving for college.

View all calculators

Keys to Investing for Retirement

There are some key concepts to understand when investing for retirement

5 Smart Investing Principles

Principles that can help create a portfolio designed to pursue investment goals.

5 Smart Investing Strategies

There are some smart strategies that may help you pursue your investment objectives

View all presentations

What Smart Investors Know

Smart investors take the time to separate emotion from fact.

Jane Bond: Scaling the Ladder

Agent Jane Bond is on the case, uncovering the mystery of bond laddering.

What Can a Million Dollars Buy You?

$1 million in a diversified portfolio could help finance part of your retirement.

View all videos