The economy is always changing, going through ups and downs like a roller coaster 🎢

These ups and downs repeat themselves through a pattern called the business cycle

Each business cycle has four phases: expansion, peak, contraction, and trough 📊

Once one cycle finishes with a trough, another one begins with an expansion!

During an expansion, the economy is growing, businesses are booming and stocks tend to perform well 📈

But when the economy reaches a peak and starts to contract (shrink), stock prices often fall, which can hurt your portfolio if you're not prepared 😱

Eventually, every contraction ends in a trough, or “bottom”, after which the economy enters another expansion phase – and so the cycle begins again ♻️

Business cycles typically last between 2 and 10 years, with the same four phases repeating themselves over and over again throughout history ⏰

Expansion periods have always tended to last longer than contraction periods, which is why over the last 50 years both the US economy and stock market have grown considerably.

It's crucial to understand business cycles because your investments are strongly influenced by them, and you can adjust your investment strategy based on which phase we are in within the cycle 🧠

Next, let’s learn more about the different phases of a business cycle and how to navigate them as an investor!