Fly on WallStreet

There will probably be dissention; however, the business cycle is alive and well. Much work was completed by Schumpeter, Kondratieff, Irving Fisher and numerous others. Having being made aware previously the limited attention span of the average Fly reader, I shall dispense with any further references and cut directly to the chase.

The business cycle has an important bearing upon financial markets and the stock market in particular.

Cycle Stage……..Recession…..Early Recovery……Recovery……Early Recession

Consumer………..Reviving…….Rising……………..Declining………Falling

Industrial………..Bottoming……Rising……………Flat………………Falling

Interest………….Falling………..Bottoming…………Rising…………Peaking

Yield Curve……..Normal………Steep………………Flattening………Inverted

Early expansion

Technology, Transportation

Middle expansion

Capital Goods, Basic Materials

Late expansion

Basic Materials, Energy, Consumer Staples

Early Contraction

Utilities, Financials

Late Contraction

Financials, Consumer cyclicals

How then has the S&P500 performed across the following timeframes?

Timeframe…………………52weeks…….YTD……..3months……..1month

Technology……………….12.72%..........11.6%...........1.4%...............[-6.1%]

Financials……………..…[-14.6%]……. [-17.6%]…..[-9.6%]……...[-15.2%]

Health Care………………7.5%................4.8%.............2.4%..............[-3.9%]

Industrials…………………13%................11.2%..........[-0.2%]……..[-7.1%]

Consumer Staples………….9.2%..............6.8%............2.3%...............[-0.4%]

Energy…………………….28.5%.............27%..............10.6%.............[-1.8%]

Consumer Discretionary….[-8.5%]……...[-11.3%]…...[-7%]………..[-10.3%]

Utilities…………………...17.4%..............14%..............5.4%..............1.4%

Materials………………….23%.................19.6%...........6.4%..............[-4.3%]

With the odd exception, we can observe that the theoretical business cycle correlates reasonably well with reality.

Energy and Utilities have been the strongest which we would expect at this stage of the business cycle which is the late expansion phase.

Financials are currently the topic-de-jour and are in point of fact indicating that the market may well be entering the early contraction phase. Consumer cyclicals, or discretionary are also showing confirmatory movement.

Therefore we can add the sector analysis to the overall market analysis of the first post and reassess the picture once again.

Jog on

grant

# posted by Broker A @ 11:40 PM