The Business Cycle

Interpretation

The business cycle, also known as the economic cycle, refers to the fluctuations in economic activity that an economy experiences over time. It typically consists of four main phases: expansion, peak, contraction (or recession), and trough. The cycle can be measured and reflected in various economic indicators such as GDP growth, employment data, consumer confidence, leading indicators, stock market performances, interest rates, commodity prices, and sector performance. These indicators can be visualized in charts that reflect the cyclical patterns of rising and falling economic activity.
The causes of economic cycles are complex, involving factors such as fluctuations in aggregate demand (consumer spending, business investment, government spending), monetary influences (interest rates, credit availability), and external shocks (technological changes, natural disasters, political events). Psychological factors like confidence and speculation, as well as structural shifts (demographic changes, industry transformations) and supply-side elements (productivity, resource availability), also play a role.

Further Information

• CFI: Business Cycle
• Investopedia: Economic Cycle: Definition and 4 Stages of the Business Cycle
• Wikipedia: List of recessions in the United States
• Longermtrends: Stocks to Commodities Ratio
• Longermtrends: The Real Interest Rate
• Longermtrends: US Debt to GDP
• Longermtrends: The Real Interest Rate
• Longermtrends: Market-cap Weight vs. Equal Weight
• Longermtrends: Cyclical vs. Defensive Stocks

Data Sources

• S&P 500
• Federal Reserve Bank of St. Louis: Recent S&P 500 prices
• Multpl: S&P 500 prices until 1927
• Yahoo Finance: S&P 500 prices from 1928 until 2023
• US gross domestic product
• Federal Reserve Bank of St. Louis: US gross domestic product since 1947
• Congressional Budget Office: Historical gross domestic product
• Loans and leases in bank credit
• Federal Reserve Bank of St. Louis: Loans and leases in bank credit since 1973
• Federal Reserve Bank of St. Louis: Loans and leases in bank credit from 1950 until 1973
• OECD: Consumer opinion survey
• OECD: Composite leading indicator
• Federal Reserve Bank of St. Louis: Nonfarm Payrolls
• Federal Reserve Bank of St. Louis: Unemployment rate
• Federal Reserve Bank of St. Louis: Initial claims
• Federal Reserve Bank of St. Louis: Sahm Rule Recession Indicator
• Oil prices
• Federal Reserve Bank of St. Louis: Oil prices
• Macrotrends: Historical oil prices
• Gold prices
• Yahoo Finance: COMEX gold price
• OnlyGold: Historical gold prices from 1793 until 2000
• Producer Price Index (PPI)
• Federal Reserve Bank of St. Louis: Producer Price Index for All Commodities
• Historical Statistics of the United States, Colonial Times to 1970: Commodity Index until 1913 (Chapter E, pages 199-201)
• Copper prices
• Yahoo Finance: Copper prices since 2000
• U.S. Geological Survey: Historical copper prices until 2000
• Federal Reserve Bank of St. Louis: Federal Funds Rate
• Treasury constant maturity rates
• 10-year Treasury constant maturity rate
• Stooq: Data since 1871
• 1-year Treasury constant maturity rate
• Federal Reserve Bank of St. Louis: Data since 1990
• Capital Markets Data: Data from 1929 until 1990 (originally from here and here)
• Robert Shiller Online Data: Data until 1929
• M2 money stock
• Federal Reserve Bank of St. Louis: M2 money stock (weekly) since 1980
• Federal Reserve Bank of St. Louis: M2 money stock (monthly) from 1959 until 1980
• United States Census Bureau: Historical statistics of the United States, colonial times to 1970 (M2 money stock until 1959, Chapter X, pages 992-993). Following Bannister and Forward (page 28), M2 prior to 1959 is calculated by adding "Currency held by the public" + "Deposits adjusted, commercial banks" + "Bank vault cash" + "Monetary gold stock" + "Deposits at nonbank thrift institutions"
• MSCI: USA
• MSCI: USA equal weighted
• MSCI: USA cyclical sectors
• MSCI: USA defensive sectors