Where are we in the economic cycle?

by Andrew Newman
in Economy
4 May 2009 | 0 Comments

In volatile times a simple model can be useful to help investors understand where we are in the economic cycle and what might come next. Fidelity International uses an "Investment Clock" that links the performance of asset classes and equity sectors to the global economic cycle. Using the clock we can estimate what phase we are in and where we are heading.

Current economic indicators suggest the recent downturn in industrial activity and trade is slowing. The inflation indicator is at its most negative since 1991 and there has been an improvement in several business confidence surveys, particularly an improvement in purchasing managers indices, which suggests an end to the plunge in markets witnessed in Q4 2008 and Q1 2009. However, a full recovery still looks distant given continued housing weakness and the likelihood of further deleveraging of bank balance sheets.

All this indicates the global economy - including Australia - is in a phase called ‘reflation', where inflation is falling and growth is just starting to pick up again.

The above article has been sourced from FIL Investment Management (Australia) Limited.

Important Information

The information provided is general in nature and does not constitute financial advice. While we have taken reasonable care in providing this information, it should not be construed as being specific to your investment objectives, financial situation or particular needs. It's important for you to consider these matters before making any financial decision and we recommend you seek financial advice.

Where are we in the economic cycle?

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