There are 5 primary stages of a business cycle:
- Recession
- Recovery
- Early Expansion
- Late Expansion
- Slowing into Recession
1)Recession
The recession stage is described as the bottom stage of the cycle. It is characterized as the stage ahead of recovery. In this stage, the Fed will expand the money supply in order to stimulate growth. Attractive investment opportunities in this stage include investments such as commodities and stocks.
2) Recovery
The recovery stage is characterized as the stage after recovery. The economy is starting to "recover" after the recession; the Federal Government's moves to stimulate the economy begin to have an affect. In this stage, attractive investment opportunities include investments such as cyclical investments and commodities.
3)Early Expansion
The early expansion stage is a continuation of the recovery stage, where the recovery begins to gain momentum. In this stage, attractive investment opportunities include investments in the overall stock market and real estate.
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