Bradley Williams, Chief Investment Officer
June 11, 2018
The National Bureau of Economic Research (NBER) is commonly looked to in determining the beginning and end of economic cycles. The organization has compiled economic data from 1854, delineating the peak, trough, and length of each business cycle in the United States.
The current economic expansion, according to NBER, has now become the second longest on record at 107 months. This cycle has surpassed the previous second longest expansion of the 1960s and now only trails the 120-month expansion experienced through most of the 1990s. Further, a look at current readings suggests this expansion has a chance of becoming the new record holder.
Since the beginning of the data series, the average expansion cycle has lasted just under 39 months and for the 11 most recent expansions since 1945, that average has been 58 months. The duration of this cycle has almost certainly been aided by the monumental level of stimulus provided by central bank policymakers around the world.
Importantly, the tides of these programs are beginning to shift. The U.S. Federal Reserve has already commenced small contractions of its balance sheet and the current expectation is the European Central Bank (ECB) will transition to shrinking its balance sheet by the end of this year.
This will likely prove a complex task for policymakers to remove the stimulus while not capsizing business activity. Fortunately for central bankers, this process begins with the wind at their back – leading indicators in the United States reflect greater strength now than in past times leading into recession.
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