The Economic Cycle
- Currently in long-term secular uptrend because of:
- macro environment
- corporate growth
- the borrowing mentality
- popularization of investing
- investor psychology
The output of an economy is the product of hours worked and rate of work done. These are affected by fundamental factors like birth rate which change little from year to year.
Factors affecting short-term trend:
- Willingness to work (market conditions etc.)
- Fear of spending
- Amount of wealth: consumers are unlikely to fund consumption by selling stocks or homes
Most economic forecasts are just extrapolations of current trends: they are usually correct but not valuable. Unconventional forecasts (e.g. predicting deviations from the long-term trend) are usually incorrect but valuable
See also How Governments Affect the Economic Cycle and How Central Banks Affect the Economic Cycle.