Economic Cycle

Loading the player...

What is the 'Economic Cycle'

The economic cycle is the natural fluctuation of the economy between periods of expansion (growth) and contraction (recession). Factors such as gross domestic product (GDP), interest rates, levels of employment and consumer spending can help to determine the current stage of the economic cycle.

BREAKING DOWN 'Economic Cycle'

An economy is deemed to be in the expansion stage of the economic cycle when gross domestic product (GDP) is rapidly increasing. During times of expansion, investors seek to purchase companies in technology, capital goods and basic energy. During times of contraction, investors will look to purchase companies such as utilities, financials and healthcare .

RELATED TERMS
  1. Business Cycle

    The fluctuations in economic activity that an economy experiences ...
  2. Peak

    The highest point between the end of an economic expansion and ...
  3. Expansion

    The phase of the business cycle when the economy moves from a ...
  4. Trough

    The stage of the economy's business cycle that marks the end ...
  5. Economic Conditions

    The state of the economy in a country or region. Economic conditions ...
  6. Contraction

    A phase of the business cycle in which the economy as a whole ...
Related Articles
  1. Economics

    Business Cycle

    The business cycle refers to the fluctuations in economic activity that an economy experiences over a period of time. It consists of expansions, or periods of economic growth, and contractions, ...
  2. Professionals

    Business Cycle

    NASAA Series 65: Section 15 Business Cycle. This section explains the different phases of a business cycle.
  3. Professionals

    Gross Domestic Product

    A country’s Gross Domestic Product or GDP measures the overall health of a nation’s economy. The Gross Domestic Product is defined as the value of all goods and services produced ...
  4. Economics

    Macroeconomics: The Business Cycle

    By Stephen Simpson The business cycle is the pattern of expansion, contraction and recovery in the economy. Generally speaking, the business cycle is measured and tracked in terms of GDP and ...
  5. Professionals

    Business Cycles

    Business Cycles
  6. Professionals

    Life Cycle Analysis: The Business Cycle

    CFA Level 1 - Life Cycle Analysis: The Business Cycle. Learn the five primary stages of a business cycle. Explains the stages of recovery, early and late expansion, and slowing into recession.
  7. Fundamental Analysis

    Sector Rotation: The Essentials

    We look at how the market signals impending economic cycles and sector performance during each stage.
  8. Economics

    4 Stages Of The Economic Cycle

    Learn about the general outline of an economic cycle to determine which sector to invest in.
  9. Economics

    4 Stages Of The Economic Cycle

    Here’s a list of the four basic stages of the economic cycle, and some telltale signs associated with each.
  10. Active Trading Fundamentals

    Recession: What Does It Mean To Investors?

    Understanding the business cycle and your own investment style can help you cope with an economic decline.
RELATED FAQS
  1. What is the average length of the boom and bust cycle in the U.S. economy?

    Learn more about the timing and impact of the expansion and contraction periods of the average business cycle in the U.S. ... Read Answer >>
  2. What are the key metrics used to measure the business cycle?

    Learn what key metrics are used to determine if the business cycle is in a period of expansion, contraction, or at a peak ... Read Answer >>
  3. Which accounting cycle is best for my business?

    Read about the different types and interpretations of accounting cycles, and why all businesses should modify the generic ... Read Answer >>
  4. When during the economic cycle does the financial services sector perform most strongly?

    Find out how some investors use the economic cycle to develop a sector rotation strategy. Find out where financial services ... Read Answer >>
  5. What stage of the economic cycle is usually the best for an investor to enter the ...

    Learn how savvy investors employ sector rotation to gain from the electronics sector during expansion and avoid losses during ... Read Answer >>
  6. At what stage of the economic cycle should I invest in the utilities sector?

    Learn the best stage to invest in the utilities sector. Utilities are a defensive sector due to their steady business and ... Read Answer >>
Hot Definitions
  1. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  2. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  3. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
  4. Generally Accepted Accounting Principles - GAAP

    The common set of accounting principles, standards and procedures that companies use to compile their financial statements. ...
  5. DuPont Analysis

    A method of performance measurement that was started by the DuPont Corporation in the 1920s. With this method, assets are ...
  6. Call Option

    An agreement that gives an investor the right (but not the obligation) to buy a stock, bond, commodity, or other instrument ...
Trading Center