« Business Cycle - Recovery | Main | Business Cycles - Late Stage Expansion »

Apr19
Business Cycle - Expanding Growth
During the expansion and growth phase of an economic cycle, interest rates and inflation remain low.  This leads to rising real incomes (nominal incomes minus inflation).  Rising real incomes leads to rising consumption.  Banks relax their lending standards and low interest rates lead to increased borrowing. 

Because consumers represent 2/3rds of the US GDP, when they increase their spending, the increase in demand leads companies to increase production.  This leads to rising capacity utilization.  As plants are used efficiently, productivity continues to rise.  This leads to improved margins and improved profits. 

The increase in production leads companies to begin to hire again and unemployment rates begin to fall as the economy generates more jobs.  Also, capital spending begins to accelerate so that companies can take advantage of the new demand.
This scenario is ideal for stocks and good for bonds.  Cash would be neutral.  It is during this part of the cycle that you would have your maximum exposure to stocks.  You can increase the beta of your portfolio above 1 and you can move to increase the mid-cap stocks. 

This is the point in the cycle where you would have neutral duration in your bond portfolio.  You would want to match the duration of your benchmark.  You would keep just enough cash in your portfolio to meet your liquidity needs.  You would sell things of lesser quality when you wanted to buy something of better quality or faster growth.

2 Comments/Trackbacks




I think you have done such a nice with your blog. Best of luck to ya TajaC

Thanks TajaC!

What would you like to see more of on the site?

Larry

submit a trackback

TrackBack URL for this entry:

post a comment

Name, Email Address, and URL are not required fields.





Comment Preview

« Business Cycle - Recovery | Main | Business Cycles - Late Stage Expansion »

Advertise

Related Resources

sponsored ads



Incredible Hall of Acclaim.

subscribe


Prefer Email?
Subscribe below-

Enter your Email:


Powered by FeedBlitz What's this?

Current News

Support This Blog

business social media

Use these fast growing business social media sites to promote your business, feature your products, spotlight your business leaders, create links, and drive traffic back to your company site, all for free!

BIZZlogos - Add your logo - free link to your site
BIZZphotos - Add photos of your products and people
BIZZprofiles - Submit your profile and build your online visibility
BIZZspotlight - Spotlight your business with free links
BIZZvideos - Videos about businesses, products and business people.
BIZZbites - "Digg" for Business - Submit your articles and posts

know more media network

View Network Map

Network Feed List (OPML)

Know More Media Network
Feed


we support unitus

PRWeb

Influencer



GrowYourFunds is a member of the Know More Media network of business related blogs.

Here are some current headlines from some of our business publications:

ProductivityGoal

CallCenterScript

AdHurl

TheBizofKnowledge

LandingTheDeal

CustomersAreAlways

HealthCareVox

WebMetricsGuru

TheInsurancePolicy

MarketingBlurb