Making Business Cycles Work For You

by David Jenyns on November 17, 2008

The market is always in the habit of overbuying stocks of favored industries or overselling “deflated industries.”

Actually, deflated industries are often just in the “down” cycle of the whole economy, especially when they are plagued by excess capacity. Earnings of the nation’s basic industries have experienced periodic ups and downs in line with general economy. Those stocks whose earnings tend to rise and fall with the ups and downs of the economy are identified as cyclical stocks.


They are mostly stocks of substantial companies in industries which were once growth industries but have grown up so that they form the major part of the total economy. Even without this projected substantial gain in G.N.P., the large companies of basic industries are expected to continue their cyclical growth in line with general business cycles; and there should always be opportunities if you know how to profit from them by studying the nature and patterns of these cycles.

In his “Anticipating the Magnitude of Recessions and Recoveries,” William Kurtz saw a close relationship between industrial production, bank reserves and residential construction over the course of a business cycle.

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