“The four most dangerous words in investing are: This time it’s different”

– Sir John Templeton

The business cycle is among the most reliable recurring patterns. It can be decomposed into four distinctive stages. These are early-, mid-, and late-cycle before a recession resets the pattern. Evidence-based research revealed distinctive performance characteristics across asset classes and cycle stages. Equities typically corrected before and during recessions. The late-cycle period is characterized by strong consumer spending and business investment. Interest rates are driven up by demand during that period and typically peak during the late-cycle as the economy runs at or near full capacity utilization. Meanwhile, the labor market is strong and inflationary pressure builds up as workers are confident with their bargaining position. These are just a few examples of fundamental regularities that are statistically significant. We focus on these regularities to generate investment ideas and steer asset allocation.