Business Cycle Investing: Navigating Growth, Slowdowns And Shifts

Business cycles typically consist of alternating periods of economic growth and economic slowdowns. In the growth phase, businesses thrive, incomes rise and consumer spending increases. A sustained period of positive growth usually results in overconfidence and overcapacity which paves the way for slower or negative growth. In a downturn, businesses struggle, incomes fall, and consumers get nervous and postpone discretionary spending. Eventually, when the supply of goods and services starts to lag demand, the upward cycle starts afresh.