Six Stages of Business Cycle Investing
In Technical Analysis Explained, Martin Pring notes that since there are three major financial markets (stocks, bonds and commodities) and each has two turning points in a given cycle, there are six turning points in each cycle. He calls these turning points the six stages and uses them as a reference point for identifying the current phase of the business cycle and by extension the next likely turning point.
Stage 1: Slowing growth rates or early recession. Interest rates start to fall and bonds rally.
Stage 2: Business cycle trough. Stocks begin to rally.
Stage 3: Late recession and early recovery. Commodities begin to rally.
Stage 4: Early recovery. Interest rates trough and bonds peak.
Stage 5: Cycle peak. Stocks peak.
Stage 6: Slowing growth, commodities peak.
For more information, see all articles on: Economic Analysis, Investing in Commodities, Investing in Stocks, Investing in bonds, Technical Analysis See also:
The Intelligent Investor: The Classic Text on Value Investing
Financial Statement Analysis: A Practitioner's Guide, 3rd Edition
Managing Investment Portfolios: A Dynamic Process (CFA Institute Investment Series)
