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Business Cycle Update
Second Quarter 2025
Global business cycle in a less synchronized expansion
The global cycle is becoming less synchronized as manufacturing activity and policy decisions diverge. The U.S. continued to show indications of both mid- and late-cycle dynamics. China has begun to demonstrate signs of positive cyclical momentum, supporting its recovery, but weakness in the property sector remains a headwind. Policy easing and improvements in sentiment have helped support the EU outlook. Canada has shown signs of early cycle but high exposure to U.S. trade remain a hurdle for its recovery.
All
United States
Canada
China
India
South Korea
Japan
Mexico
Brazil
United Kingdom
Germany
Italy
France
Australia
Spain
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Early
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Mid
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Late
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Recession
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United States
Canada
China
India
South Korea
Japan
Brazil
United Kingdom
Germany
Italy
France
Australia
Mexico
South Africa
Spain
- Views expressed are as of the date indicated, based on the information available at that time, and may change based on market and other conditions. Unless otherwise noted, the opinions provided are those of the authors and not necessarily those of Fidelity Investments or its affiliates. Fidelity does not assume any duty to update any of the information.
- Generally, among asset classes, stocks are more volatile than bonds.or short-term instruments and can decline significantly in response to adverse issuer, political, regulatory, market, or economic developments. Although the bond market is also volatile, lower-quality debt securities, including leveraged loans, generally offer higher yields compared to investment-grade securities, but also involve greater risk of default or price changes. Foreign markets can be more volatile than U.S. markets due to increased risks of adverse issuer, political, market, or economic developments, all of which are magnified in emerging markets.
- Investment decisions should be based on an individual's own goals, time horizon, and tolerance for risk.
- In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longerterm securities.)
- Fixed-income securities carry inflation, credit, and default risks for both issuers and counterparties.
- Investing involves risk, including risk of loss.
- Past performance is no guarantee of future results.
- Diversification and asset allocation do not ensure a profit or guarantee against loss.
- All indices are unmanaged. You cannot invest directly in an index.
- The Business Cycle Framework depicts the general pattern of economic cycles throughout history, though each cycle is different; specific commentary on the current stage is provided in the mai body of the text. In general, the typical business cycle demonstrates the following:
- During the typical early-cycle phase, the economy bottoms out and picks up steam until it exits recession then begins the recovery as activity accelerates. Inflationary pressures are typically low, monetary policy is accommodative, and the yield curve is steep. Economically sensitive asset classes such as stocks tend to experience their best performance of the cycle.
- During the typical mid-cycle phase, the economy exits recovery and enters into expansion, characterized by broader and more self-sustaining economic momentum but a more moderate pace of growth. Inflationary pressures typically begin to rise, monetary policy becomes tighter, and the yield curve experiences some flattening. Economically sensitive asset classes tend to continue benefiting from a growing economy, but their relative advantage narrows.
- During the typical late-cycle phase, the economic expansion matures, inflationary pressures continue to rise, and the yield curve may eventually become flat or inverted. Eventually, the economy contracts and enters recession, with monetary policy shifting from tightening to easing. Less economically sensitive asset categories tend to hold up better, particularly right before and upon entering recession.
- Please note that there is no uniformity of time among phases, nor is there always a chronological progression in this order. For example, business cycles have varied between one and 10 years in the U.S., and there have been examples when the economy has skipped a phase or retraced an earlier one.