When to jump on the bull market in the business cycle

Matthew Partridge looks at the business cycle, and explains which sectors tend to do well as markets rise and fall.

All companies are to some extent affected by the "big picture" backdrop the state of the economy in which they are operating. As a result, understanding the "business cycle" the ups and downs typically endured by an economy over the long run can be very useful for investors.

Some sectors ("cyclical businesses" such as housebuilders or industrial groups) do well in boom times, only for profits to dry up when recession hits. Others ("defensives" such as utilities or companies that sell necessities) enjoy fairly stable earnings almost regardless of the economic conditions. So if you can figure out which phase the economy is going through, you should in theory be able to switch to the sectors best-placed to profit from these shifts.

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Dr Matthew Partridge
Shares editor, MoneyWeek

Matthew graduated from the University of Durham in 2004; he then gained an MSc, followed by a PhD at the London School of Economics.

He has previously written for a wide range of publications, including the Guardian and the Economist, and also helped to run a newsletter on terrorism. He has spent time at Lehman Brothers, Citigroup and the consultancy Lombard Street Research.

Matthew is the author of Superinvestors: Lessons from the greatest investors in history, published by Harriman House, which has been translated into several languages. His second book, Investing Explained: The Accessible Guide to Building an Investment Portfolio, is published by Kogan Page.

As senior writer, he writes the shares and politics & economics pages, as well as weekly Blowing It and Great Frauds in History columns He also writes a fortnightly reviews page and trading tips, as well as regular cover stories and multi-page investment focus features.

Follow Matthew on Twitter: @DrMatthewPartri