If you are a position trader, you are constantly searching for long-term themes in the market. Probably the most important “macro” indicator we follow is the business cycle.

The business cycle drives earnings and earnings drive stock prices. Thus, it only makes sense that this should be your long-term starting point.

Defined, the business cycle is sum of the recurring and fluctuating levels of economic activity that an economy experiences over a long period of time. There are five stages of the business cycle which are :

• growth
• peak
• recession
• trough
• recovery.

Since World War II, most business cycles have lasted three to five years. The average duration of an expansion is 45 months and the average duration of a recession is 11 months.