Business Cycle
The recurring pattern of expansion, peak, contraction, and trough.
What is Business Cycle?
Economies alternate between expansion (rising output and employment), a peak, contraction (falling activity), and a trough before the next expansion. Cyclical industries - autos, housing, luxury goods - swing with the cycle; defensive industries - utilities, food, healthcare - hold up better in contractions.
Business Cycle: a worked example
Late in an expansion, an adviser might trim cyclical stocks and add defensive sectors ahead of an expected contraction.
More terms in Economics & Financial Reporting
Leading, Coincident & Lagging Indicators
Data series that move before, with, or after the business cycle.
Deflation vs. Disinflation
Falling prices versus a slowing rate of price increases.
Currency Valuation & Exchange Rates
What one currency buys of another, and who wins when it moves.
Sovereign Debt
Bonds issued by a national government.
Trade Deficit
A country imports more goods and services than it exports.
Income Statement
Revenue, expenses, and profit over a period of time.
Balance Sheet
Assets, liabilities, and equity at a single point in time.
Statement of Cash Flows
Where cash came from and where it went: operating, investing, financing.