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Stock Market Cycles

the flattening or declining general stock market. As the economic/ stock price cycle enters Stage IV and the economy rolls over into recession, the relatively superior earnings growth of these sectors fades. Their stock prices relatively underperform.

Stage IV experiences different impacts of the recession on the expected earnings of different sectors. The defensive industries, for which sector rotation investors anticipate slowly increasing, stable, or moderately declining earnings through the recession, are emphasized. Their relatively superior earnings performance, coupled with declining interest rates, generates relatively superior common stock price performance.

NOTE

1. The ripple effects of the original OPEC (The Organization of Petroleum Exporting Countries) price shock took almost a decade to unwind. More recent, albeit milder, oil price swings, some caused by OPEC, continue to strike and ripple throughout the economic/stock price cycle.

Appendix 4A Sector Rotation Categories

STAGE I

Autos

Containers

Railroads

Trucking

Housing

Furniture/Appliances

STAGE II

Apparel Broadcasting Office Supplies Retail



	70	Stock Market Cycles

	the flattening or declining general stock market. As the economic/ stock price cycle enters Stage IV and the economy rolls over into recession, the relatively superior earnings growth of these sectors fades. Their stock prices relatively underperform. Stage IV experiences different impacts of the recession on the expected earnings of different sectors. The defensive industries, for which sector rotation investors anticipate slowly increasing, stable, or moderately declining earnings through the recession, are emphasized. Their relatively superior earnings performance, coupled with declining interest rates, generates relatively superior common stock price performance.

	NOTE 1. The ripple effects of the original OPEC (The Organization of Petroleum Exporting Countries) price shock took almost a decade to unwind. More recent, albeit milder, oil price swings, some caused by OPEC, continue to strike and ripple throughout the economic/stock price cycle.

	Appendix 4A Sector Rotation Categories

	STAGE I Autos Containers Railroads Trucking Housing Furniture/Appliances STAGE II Apparel Broadcasting Office Supplies Retail