Sunday, January 2, 2011

Economic Cycle

An economic cycle is the stylized ups and downs and flow and ebb of an economy. Often referred to as the business cycle, an economic cycle generally runs in the following stages: 1. Boom - Strong Economic Growth (the top), 2. Slowdown - Slowing/declining Economic Growth, 3. Recession - Negative Economic Growth, or Contraction (the bottom), 4. Recovery - Period of Growth following a recession. These varying stages of the economic cycle will see changes in interest rates, employment levels, productivity, consumption, and of course asset prices. Economic cycles are an important aspect of investing, with many strategies predicated on the course of a cycle and outlook e.g. asset allocation strategies, sector rotation, etc.

Synonyms: Business cycle, Boom and bust, Trough and Peak

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