![]() ![]() Recent tax law changes for both individuals and corporations may very well extend the economic momentum. Leading indicators for the economy point toward a continued 3% growth rate or more. This serves as a gentle reminder not to extrapolate the past forever into the future because the economy and financial markets move in ever changing cycles.Ĭertainly, the business cycle is alive and well, growing stronger by the day. In fact, you may recognize the “three bell curves” (disguised as a mountain range in the Pring Turner logo). For us, each work week begins with a thorough review of market and business cycle research. The real advantage of following the inter-relationship between the business cycle and financial asset prices is to always be on alert for the next turning point. Putting it all together, while we are moving into the later stages of the business cycle there is potential for more upside in stock prices. The shaded area is our best estimation of where we are in the cycle. ![]() Where are we today? Stock prices have certainly been strong, economic momentum is building and interest rates and inflation are finally turning up from very low levels. Lastly, inflation and interest rates (green line) lag the economy. Stock prices (red line) lead the economy, peaking and bottoming ahead of business activity. The blue line represents the trajectory of the economy (GDP), from boom to bust and back again. This simple, yet elegant chart illustrates the relationship between stocks, bonds, inflation-sensitive assets and the economy. You may be familiar with our three bell curves model of the typical business cycle featured above.
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