Understanding economic cycles is fundamental for both business decision-making and personal financial planning. The economy naturally moves through phases of expansion, peak, contraction, and recovery. Knowing where we stand today can inform smarter choices for your future.
What Are the Phases?
In the early-cycle phase, the economy moves out of a trough or recession: consumer demand and business investment pick up, growth accelerates, inflation remains low, and interest rates are often accommodative.
In the mid-cycle phase, growth continues but moderately; inflation begins to pick up, monetary policy may turn less accommodative, and credit conditions may tighten slightly.
The late-cycle phase is when expansion is mature but shows signs of slowing: inflation may be higher, interest rates may be elevated, yield curves may flatten or invert, and businesses may face margin pressure.
Finally, contraction or recession is a phase of declining economic output, rising unemployment, weaker spending, and ultimately a trough before recovery begins.
Where Are We Now?
While every cycle is unique and timing is always uncertain, current indicators suggest we may be in or approaching a late-cycle phase. Growth remains positive, but recent data show signs of moderation: Leading indicators such as the U.S. Leading Economic Index have declined, signaling slower momentum ahead.
Inflation remains a concern, and central banks appear cautious, raising questions about how much further tightening may go before a pivot to easing.
What’s Next?
If the economy is entering or already in the late-cycle phase, it means the next transition might be into contraction or a soft landing followed by recovery. Businesses and investors should prepare for slower growth, tighter credit conditions, and increased risk. Opportunities might shift toward more defensive sectors, value-oriented assets, and strategies focusing on capital preservation. Conversely, a recovery phase could bring renewed growth, lower rates, and opportunities for more aggressive investment and expansion.
Take Action
Whether you’re managing a business or planning your personal finances, knowing where you are in the cycle enables better timing, risk management, and strategic positioning. Let’s talk about how your strategy should adjust given current conditions and what it means for your plan moving forward. Make an appointment with our advisors to assess your position and prepare for the next phase with confidence.
