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Breaking down the late-cycle market

There has been much reference to the market being 'late-cycle'. Find out what this means for investors.

23/04/2019

Find out more about investing in the late cycle here

 

The global economic cycle is thought to broadly have four phases. Judging where along the cycle we are is hard but there are certain indicators: 

Early Cycle: Typically characterised by a sharp increase in economic activity, and consumer & business spending

Mid-Cycle: The longest phase of the economic cycle where growth peaks

Late-Cycle: Usally marked by tightening monetary policy and a general deceleration in economic growth

Recession: Contraction in economic activity and less consumer spending  

Since the 1950s, US economic cycles have typically lasted five and a half years on average1. However, there is a wide variation in lengths to cycles, ranging from 18 months up to 10 years. 

Are we in a late-cycle, or end-cycle environment?

Ten years on from the Global Financial Crisis, we expect global financial markets to gradually slow in 2019. However, we believe an outright recession is not imminment and the cycle still has room to run.  

While a 'late-cycle' market is expected to provide more subdued returns, investors need to be careful not to retreat from markets. Factors such as asset allocation, access to multiple sources of income and active security selection has become even more critical in meeting investor goals.  

 

1National Bureau of Economic Research which measures US economic cycles (using GDP)