Sam Stovall's Sector Investing, 1996 
states that different sectors are stronger at different points along the business cycle. The table below describes this theoretical model throughout the business cycle.
states that different sectors are stronger at different points along the business cycle. The table below describes this theoretical model throughout the business cycle.Stage: Consumer Expectations: Industrial Production: Interest Rates: Yield Curve: | Full Recession Reviving Bottoming Out Falling Normal | Early Recovery Rising Rising Bottoming Out Normal (Steep) | Full Recovery Declining Flat Rising Rapidly (Fed) Flattening Out | Early Recession Falling Sharply Falling Peaking Flat/Inverted |
The graph below, courtesy of StockCharts.com , shows these relationships and the order the key sectors respond to the economic cycle. The Stock Market Cycle precedes the Economic Cycle as investors try to anticipate how the market will react to the changes to the economy.
