How Unique is the Current Economic Cycle?
Each of the 13 business cycles since 1945 had one or more unique features. The current economic expansion that began in the third quarter of 2020 is extremely unique. Perhaps most notable was the unprecedented stimulus by the federal government in both monetary and fiscal policy. Private credit creation has lagged spending in the current cycle, an unusual occurrence. The tightness of the labor market in the current cycle has been unprecedented, with the economy reaching full employment in a record two years. Most of these unique characteristics can be attributed to the pandemic and its aftermath.
The unique nature of the current business cycle has important implications for financial markets. Most importantly, the current chaotic cycle has presented daunting challenges to economic forecasters, undermining investor confidence. Most notably, the atypical nature of the cycle has resulted in false recession signals, which have accentuated market volatility in both the equity and fixed-income markets. Widespread uncertainty has also contributed to large investment flows into perceived safe-haven assets, including mega-cap growth stocks, high-grade corporate bonds, and money market funds... READ MORE
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