208-664-8980

1875 N. Lakewood Dr.
Suite 102
Coeur d'Alene, ID 83814

Investment Read Time: 3 min

The Business Cycle

What has upswings and downturns, troughs, peaks, and plateaus? Though such terms could easily describe a roller coaster ride, they are also commonly used to describe 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 forecast the direction of the economy. The National Bureau of Economic Research makes official declarations about the economic cycle based on specific factors, including 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 or even cyclical. Its pattern resembles the movement of waves, and those waves don’t consistently undulate at set, periodic 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

Wave Chart

Stages of Cycle

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 may be influential as well.

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 FMG Suite.

Share |
 

Related Content

Counteracting Capital Gains with Tax-Loss Harvesting

Counteracting Capital Gains with Tax-Loss Harvesting

You may have heard the phrase "tax-loss harvesting." A financial professional may be able to provide some guidance.

The Big Picture–Table 10 is a Hot Spot

The Big Picture–Table 10 is a Hot Spot

What’s the hottest table in economy town? Need a hint? Check the Personal Income and Spending Report

Tax & Estate Strategies for Married LGBTQ+ Couples

Tax & Estate Strategies for Married LGBTQ+ Couples

Learn how to maximize your tax and estate strategy as a married member of the LGBTQ+ community.

 

Have A Question About This Topic?







Thank you! Oops!

4 Ways Thinking Long-Term Can Improve Your Everyday Life

Financial planning often doesn’t take place on a beach. But the next time you find yourself there, try this experiment, courtesy of management and motivational guru Stephen R. Covey: You’ll need a mason jar and an assortment of big rocks, smaller gravel, sand, and water.

Protection Against Uninsured Drivers

You’re hit by an uninsured driver. Now what? Are you protected against financial losses?

3 Estate Challenges for Blended Families

If you’ve been re-married or divorced, these family structures may present some unique challenges. This article will help your clients with blended families think and prepare their estate strategy.

View all articles

Federal Income Tax

Use this calculator to estimate your income tax liability along with average and marginal tax rates.

Contributing to an IRA?

Determine if you are eligible to contribute to a traditional or Roth IRA.

Comparing Investments

This calculator compares the net gain of a taxable investment versus a tax-favored one.

View all calculators

5 Smart Investing Principles

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

Long-Term-Care Protection Strategies

The chances of needing long-term care, its cost, and strategies for covering that cost.

Your Cash Flow Statement

A presentation about managing money: using it, saving it, and even getting credit.

View all presentations

Safeguard Your Digital Estate

If you died, what would happen to your email archives, social profiles and online accounts?

Don’t Myth Out on Whole Life

Whole life insurance can help protect what matters most: your family, your assets, and your legacy.

Questions to Consider When Buying a Vacation Home

Doing your research is key before buying a vacation home.

View all videos