Yesterday we wrote an article on the economic cycles, so what is the difference between that and an economic trend? A trend is the direction that the market is moving over time. The cycle, as we learned yesterday, is the different periods that the economy goes through. Economic trends show you what part of the economic cycle we are moving towards. Trends can go up, down or sideways. Upward is how it sounds, and wages are rising. Downward means that the economy is shrinking and unemployment is rising. Sideways just means it’s a steady economy. There are some indicators to look at in the market to see what trend may be occurring, such as gross domestic product, unemployment and consumer confidence. Others include:
Economic Cycles
“Change is the only thing that is constant”
-Heraclitus
Economies cycle between expansions and contractions naturally. These changes are due to employment levels, interest rates, supply and demand, etc. There are four stages in the cyclic pattern: expansion, peak, contraction and trough. Expansion is when GPD is increasing and unemployment is decreasing. The peak is a turning point in which output begins to decrease. Contraction or recession is defined as output decreasing and unemployment increasing. The trough is where recession ends and output begins increasing again. We can dive a little deeper into the characteristics each of these.
