The Business Cycle’s Impact on Asset Performance

Key Points

  • The global economy experiences upswings and downswings, which are often referred to as the business cycle. A variety of factors drive these economic growth changes, including changes in interest rates, credit availability, and consumer and business confidence.
  • Using a simple methodology, we identify four different stages of the global business cycle: recovery, expansion, slowdown, and contraction. We review the distributions of asset performances across these stages.
  • Asset performance is highly sensitive to the global business cycle, with many assets experiencing meaningful shifts in performance distributions across business cycle stages. At a high level, equity performance is strongest in recoveries and government bond performance is strongest in contractions.
  • Understanding the distributions of asset performance across business cycle stages and considering where the global economy is headed are key inputs in a rigorous investment decision-making framework.

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