Investment Decisions Based on the Business Cycle and Sector Rotation

The business cycle is a long-term pattern of changes in Gross Domestic Product (GDP) that follows four stages: expansion, prosperity, contraction, and recession. After a recessionary phase, the expansionary phase can start again. The phases of the business cycle are characterized by changing employment, industrial productivity, and interest rates. Some economists believe that stock price trends precede business cycle stages. As a result the economic cycle provides the strategic framework for economic activity and investing. The business cycle affects employees, employers and investors.

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