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CHAPTER 2: Sector Allocations > Utilizing Sectors in Market Cycles

Utilizing Sectors in Market Cycles

Financial markets endeavor to predict the state of the economy, anywhere from three to six months into the future. That means the market cycle is usually well ahead of the economic cycle. This is crucial to remember, because as the economy is in the pits of a recession, the market begins to look ahead to a recovery. The following sections describe the four basic stages of the economic cycle along with some associated telltale signs Again, keep in mind that these usually trail the market cycle by a few months.

Late Recession

The economy has been retracting, quarter-over-quarter; interest rates are being reduced by the Federal Reserve Bank; consumer expectations have bottomed; and the yield curve is steepening. Sectors that have historically performed the best during this stage include


  

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