Here's a quick guide on how to identify the phases and what to do with your funds during which period.It is best to maintain awareness of what is happening in the business environment and continually review your portfolio on a periodic basis.THE recent inversion of the yield curve has been a talking point as a precursor of transition of business cycle from a prolonged growth era to a looming recessionary period.
Unlike market cycles, which are largely driven by sentiments and hence shorter, business cycles typically last longer between five to 10 years.This phase occurs when the economic activity has peaked and growth begins to moderate. While growth is still positive, it starts to slow down in terms of pace of growth. Corporate earnings and profit margins start to get compressed due to tighter labour market, rising wages, costs, interest expenses and continued inflationary pressure.
Consumer spending starts becoming more broad-based. Inflation continues to be modest, keeping a healthy margin for corporates. Corporates reinvest their profits into expansion which helps the equipment manufacturers and construction sector.