The business cycle works

This chart shows the relative strength of the major banks sector relative to the CRB commodity index (click on the chart to enlarge).

The rising line reflects the stronger performance of the banks relative to commodities.

This is exactly what we should expect when business is coming out of a recession, the yield curve is steep, the Fed is easing aggressively, and financial risk is declining.

When the economy starts growing at a faster pace, commodity-driven stocks outperform the financial sector. At this time the Fed talks about tightening, financial risk rises, and the yield curve flattens.

This time, in spite of the excitement, the relationship between the business cycle and stock sectors is repeating.

To find out more about my in depth view of the markets and my strategy just visit our website https://www.peterdag.com/ where you can review The Peter Dag Portfolio. You can also call me at 1-800-833-2782 to discuss your specific money management needs.

I will be happy to speak to your investment group on how the business cycle impacts investment strategies and the choice of asset classes.

George Dagnino, PhD
Editor, since 1977