Returns across the business cycle

It not a given that the economy will always rotate around the complete business cycle. It is possible that the economy will move from recession to recovery and then bounce between recovery, mid, and late cycle stages. An economy can slowdown, accelerate, and then slowdown again. A cycle is not pre-ordained nor does a specific regime have a given timeframe. This is indicative of the core problem with matching business cycle regime with asset allocation. There also is limited clarity for when an economy moves between cycles. There are no simple measures for recovery, mid, late, and recession periods. UBS provides some simple analysis on cycle uncertainty and what should do well in different stages.

The current environment is a case study in ambiguity. To some, we are in a recession, while for others we are just in the late phase of the cycle. The key problem, you cannot know where you are going until you know where you are.