Market Cycles

Four‑Phase Growth‑Rate‑Cycle

The cycle is defined using year‑over‑year growth rates across labour markets, production, demand, liquidity, inflation, and financial markets. These indicators collectively determine the economy’s position within one of four phases.

1. Acceleration Phase

  • NFP and IPI growth rising
  • Housing and mortgage approvals improving
  • Money supply stabilising or rising
  • Equity indices trending upward
  • Inflation stable or falling Interpretation: Early‑cycle expansion; strongest forward returns.

2. Peak Growth Phase

  • NFP strong but slowing
  • IPI flattening
  • Housing momentum topping
  • Inflation rising; policy tightening begins
  • Equity‑market breadth weakens Interpretation: Late‑cycle overheating; reversal risk increases.

3. Deceleration Phase

  • NFP slowing; unemployment turning up
  • IPI contracting
  • Housing and mortgage approvals falling
  • Money‑supply growth weakening
  • Equity markets rolling over
  • Inflation peaking Interpretation: Downturn; recession risk elevated.

4. Trough / Early Recovery Phase

  • NFP stabilising at low levels
  • IPI bottoming
  • Housing stabilising
  • Policy easing begins
  • Money‑supply growth turning up
  • Equity markets bottoming Interpretation: Transition to recovery; strong forward returns.

Indicator Direction & Importance

  • Positive for growth: equity indices, PMIs, retail sales, house prices, China PPI
  • Negative for growth: CPI (inflation), unemployment
  • High‑importance drivers: retail sales, PMI, equity indices, house prices, China PPI, CPI
  • Medium‑importance drivers: unemployment, FTSE 100, Japan CPI

Each series is transformed into a smoothed YoY growth rate, standardised, and aggregated into a country composite, which is then mapped into the four phases.

Country‑Level Indicator Summary (Ranked by Importance)

Below, each country’s indicators are ranked from most important to least important

🇺🇸 United States (Ranked)

  1. US.PMI — Purchasing Managers’ Index Positive; very high importance; leading production signal
  2. US.IPI — Industrial Production Index Positive; very high importance; core production‑cycle driver
  3. US.RETAIL — Retail Sales Index Positive; very high importance; core demand indicator
  4. US.SP5C — S&P 500 Index Positive; very high importance; forward earnings signal
  5. US.HPI — House Price Index Positive; high importance; early‑cycle credit signal
  6. US.CPI — Consumer Price Index Negative when rising; high importance; policy turning points
  7. US.UNEMP — Unemployment Rate Negative when rising; high importance; confirmation
  8. US.DJI — Dow Jones Industrial Average Positive; high importance; sentiment indicator

🇬🇧 United Kingdom (Ranked)

  1. UK.PMI — Purchasing Managers’ Index Positive; high importance; leading business‑cycle indicator
  2. UK.IPI — Industrial Production Index Positive; high importance; core production signal
  3. UK.HPI — House Price Index Positive; very high importance; UK is housing‑sensitive
  4. UK.RETAIL — Retail Sales Index Positive; high importance
  5. UK.CPI — Consumer Price Index Negative when rising; high importance
  6. UK.UNEMP — Unemployment Rate Negative when rising; medium importance
  7. UK.30.100 — FTSE 100 Index Positive; medium importance; global exposure

🇪🇺 Euro Area (Ranked)

  1. EU.PMI — Purchasing Managers’ Index Positive; very high importance; industrial cycle leader
  2. EU.IPI — Industrial Production Index Positive; very high importance; core production driver
  3. EU.CPI — Consumer Price Index Negative when rising; very high importance; ECB policy driver
  4. EU.RETAIL — Retail Sales Index Positive; high importance
  5. EU.STOXX50 — Euro Stoxx 50 Index Positive; high importance
  6. EU.UNEMP — Unemployment Rate Negative when rising; medium importance

🇯🇵 Japan (Ranked)

  1. JP.PMI — Purchasing Managers’ Index Positive; very high importance; export‑cycle leader
  2. JP.IPI — Industrial Production Index Positive; very high importance; core production indicator
  3. JP.N225 — Nikkei 225 Index Positive; high importance
  4. JP.UNEMP — Unemployment Rate Negative when rising; high importance
  5. JP.HPI — House Price Index Positive; medium importance
  6. JP.CPI — Consumer Price Index Negative when rising; medium importance

🇨🇳 China (Ranked)

  1. CN.PMI — Purchasing Managers’ Index Positive; very high importance; key leading indicator
  2. CN.PPI — Producer Price Index Positive; very high importance; industrial‑profit driver
  3. CN.IPI — Industrial Production Index Positive; very high importance; core production indicator
  4. CN.RETAIL — Retail Sales Index Positive; high importance
  5. CN.SSEC — Shanghai Composite Index Positive; high importance
  6. CN.CPI — Consumer Price Index Negative when rising; medium importance
  7. CN.UNEMP — Unemployment Rate Negative when rising; medium importance