The economic cycle and its impact on investments

aroominyork

Threads often refer to the economic cycle but, since I started DIYing and posting last summer, I haven't seen the cycle explained. Today's mail brought a free copy of Money Observer including the view that "Expecting more (beyond an 8000 FTSE) would only be reasonable in the early economic cycle, as that is when returns tend to be well above average. As it is, we're now moving from recovery to expansion phase..."

All this made be think it's time to understand the economic cycle and how it affects my investments and investment decisions. If this has already been discussed in previous threads I'd appreciate being directed to them; if not, please can someone explain?

dunstonh

Probably easier to link a description
https://www.investopedia.com/terms/e/economic-cycle.asp

coastline

Recessions and market downturns are something new investors should be prepared for but are probably not until it all happens.
If you are drip feeding your cash on a monthly basis this can be the least painful method rather than investing a lump sum which could fall in a short space of time.
This is why you need to give yourself more than a decade to understand the risks of equities. Even after two decades there could have been two recessions and your equity returns might not look great on paper. ? I know because it happened to me when I first started.
In the link below it shows recessions and stock market downturns aren't always linked but I know from the past when unemployment starts to rise there's usually something up worldwide.

https://www.financialsense.com/contributors/doug-short/the-s-and-p-500-and-recessions

http://www.mymoneyblog.com/images/0901/recession.gif

The current unemployment rate in the US is around 4% which is pretty low historically.

http://3.bp.blogspot.com/-GtfZ4e_fIwg/UpNeizKlV3I/AAAAAAAABDw/5YtplGeaO3Y/s1600/Ch1.png

AnotherJoe

aroominyork wrote: »

Threads often refer to the economic cycle but, since I started DIYing and posting last summer, I haven't seen the cycle explained. Today's mail brought a free copy of Money Observer including the view that "Expecting more (beyond an 8000 FTSE) would only be reasonable in the early economic cycle, as that is when returns tend to be well above average. As it is, we're now moving from recovery to expansion phase..."

All this made be think it's time to understand the economic cycle and how it affects my investments and investment decisions. If this has already been discussed in previous threads I'd appreciate being directed to them; if not, please can someone explain?

A more fundamental question might be why you care what the FTSE index is, given in effect it’s about 20 companies in only 5 or 6 industries in 6% of the world economy.

If that is really going to affect your investments you need to be spreading them much further so you can ignore articles like that.

darkidoe

I found this video very useful to understand some aspects of the economic cycle:

https://www.youtube.com/watch?v=PHe0bXAIuk0