Business Cycle Anaysis Essay Example

Lecturer:

Exploration of the Business Rotation

Question 1

  1. Determining the lifecycle events of United States of America, Germany, Japan, China, Mexico, and India

  1. The United States of America

The USA is in the middle acceleration phase. The GNP of USA increases considerably over the period under consideration. Building permits increased while the average weekly manufacturing hours decreased. This condition clearly shows that firms were spending more on plant and equipment. The new orders from manufacturers for purchasers’ goods and supplies as well as average consumer prospects for business situations increased, suggesting a more positive consumer behavior.

Germany is in the early Revival phase. The GDP turns positive with an average change of 0.3. The GDP recovers from a fallen sharply (-0.45) in the previous recession. The consumer price index declines throughout the period, an indication of declining mortgage rates and financing rates. The retail prices undergo frequent recessions and peaks an indication of increased pressure on prices.

Japan is in the middle revival phase. The GDP turns positive with an average change of 0.7. The GDP recovers from a fallen sharply (-9.4) in the previous recession. The consumer price index declines throughout the period, an indication of declining mortgage rates and financing rates.

The GDP of China turns negative. The housing and big-ticket items seem to fall off as indicated by the declining real estimate climate. Retail price value increases continually. A decline in the value added of industry, and growing number of employed people in urban areas may suggest a continued business spending. Therefore, China is in the ease-off phase.

The GDP of Mexico after recovery from a sharply fallen recession period. Rates of unemployment decline from the peak in the preceding period. Therefore, Mexico is in the early revival phase.

The production rate of India continues to rise as well as the MasterCard Indian consumer confidence directory. There is a drop in industrial production, and indication that businesses are in the early phases of rebuilding inventories. Therefore, India is in the early acceleration phase.

  1. The market to invest

The USA would be the best market to invest. This economy is in the intermediate acceleration phase characterized by an active but more moderate rate of growth. Lisa, Hofschire, and Litvak (2) noted that economic activities gather more momentum as the credit growth strengthens. Profitability is, therefore, healthy against accommodative financial policy conditions. Therefore, investing in this economy would ensure achievement of actual returns.

Question 2

  1. The leading and lagging sectors in

  1. The United States of America

Three segments are in leading. InfoTech is in the leading quadrant. Financials index moved from lagging to improving and finally to leading. Energy index moved from weakening to lagging then back to weakening and finally to leading. Telecom Serve, real estate, healthcare, materials, utilities, industrials, Cons staples, and Cons discrete indexes are lagging.

CXPO, CXPH, CXPR, and CXPC are leading while CXPD, CXPT, CXPV, and CXPU are lagging.

TPRUBB, TPMINN, TPMART, TPWS, and TPMETL are leading while UPLAND, TPFOOD, TPPHRM, TPCONT, TPCOM, WARE, PIRON and TPTEXT are lagging.

CSSPTEL moved from improving to leading. CSSPUTL moved from developing to lagging and CSSPMAT moved from leading through weakening to lagging.

  1. Global trends

From the rotation graphs, there was a common trend for USA, Germany, Japan and China. Most of the sectors in lagging portrayed an ordinary movement. They moved from lagging to weakening and then from weakening to lagging. The leading industries did not represent a common global trend. Therefore, lagging sectors accounts for a worldwide trend.

Work Cited

Lisa, Emsbo-Mattingly, et al. «The Business Cycle Approach to Equity Sector Investing.» Leadership Series 25 September 2014: 1-8.