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Investing through the Economic Cycle

February 8th, 2012
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From around the web, I thought I would share some useful charts. The first chart shows the characteristics of different phases of the economic cycle, including how different asset classes behave:

Characteristics of Each Phase of the Economic Cycle

ACG Advisors: Characteristics of Each Phase of the Economic Cycle

This chart shows the best sectors to buy at different times:

StockCharts.com: Sectors by Phase

StockCharts.com: Sectors by Phase

The following shows which strategies outperform at different times:

Fidelity Strategic Advisers, Inc: Strategies by Phase

Fidelity Strategic Advisers, Inc: Strategies by Phase

Though I believe in a valuation focused strategy regardless of the phase of the cycle, I think the shift from small to megacap and a greater focus on quality (i.e. becoming more defensive) is important.

What do you think of these charts?

 

Author Disclosure: None.

Talk to Frank about this article

 

Related posts:

  1. Best and Worst Performing Sectors after an Oil Spike
  2. Dell’s Cash Conversion Cycle provides a competitive advantage (DELL, HPQ)
  3. Value Investing Goes Exponential
  4. Surprise! Popular Media Distorts Economic Reality

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  • Michael

    Nice charts. I suppose they didn’t include valuation-based strategies because of fewer opportunities to find undervalued stocks at the peak of the cycle. Sticking to low-beta stocks during downturn is also extremely important.
    However the elephant in the room is that we cannot predict the business cycle most of the time. Even the most specialized economists of the business cycle at NBER need months to properly assess whether the economy had been in recession or not.

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