STOCKS ARE INTRICATELY LINKED TO THE BUSINESS CYCLE

The recurring periods of economic expansion and decline, known as the business cycle, have a powerful impact on the performance of the stock market.  In general, stocks become more valuable as demand and production increase, and lose their value when business activity declines.  Investors may seek to take advantage of these cycles through strategies such as sector rotation, or use buy-and-hold strategies that count on long-term growth trends to overcome the peaks and valleys of the business cycle.

You can learn more about business and economic trends in other articles of the Encyclopedia.