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The short investment cycle: Our roadmap

The essential


  • Phase 1: Equity outperformance
  • Phase 2: Outperformance of equities and commodities
  • Phase 3: Outperformance of the money market and inflation-indexed bonds
  • Phase 4: Outperformance of goverment bonds
  • Conclusion on target strategies


  • The duration of economic cycles
  • The duration of "stock market" cycles
  • Comparison between stock market cycle and economic cycle



Amundi Discussion Papers Series - October 2014

We addressed the behaviour of long cycles of around fifty years in the Cross Asset Investment Strategy of June 2013. These long cycles contain several short cycles which only last a few years. We are going to focus on those in this Discussion Paper. The importance of understanding the position in the cycle is obviously being able to anticipate the following phase in order to seize investment opportunities.

We will first describe the 4 phases of a typical short cycle, highlighting for each of them: the market behaviour, the indicators that prefigure this phase, the most appropriate forms of analysis, opportune strategies and an initial asset allocation approach.

We have chosen to present a typical cycle in order to make the approach more meaningful, drawing on our research but also our asset management experience. The performance of assets according to these different phases is subsequently shown using data going back to the early 1950s.

We shall then see that the duration of a short cycle is very stable over time if we take account of a few subtleties; as in the case of the long cycle, the short cycle corresponds to an economic reality. We can track it by monitoring, in particular, the decisions of central banks. We have an additional interpretation key by observing the cycle simply based on equities – what we call the “stock market cycle”. This second approach is a means of refining the relevance of the analysis. Our research on the subject dates back to the end of the 19th century.

Finally, we will observe that the most recent short cycles perfectly illustrate this logic by highlighting the common points with our stylised approach and the specific features of these cycles. As Mark Twain said “history does not repeat itself, but it rhymes”.

This roadmap, which we have gradually refined over the last thirty years, is regularly used as a reference in investment committees.

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An economy’s ability to grow depends on the growth of the population of working age and the productivity gains that it generates. During the course of a cycle, economic growth fluctuates around this trend, which corresponds to its potential. [...]

MIJOT Eric , Head of DM Strategy Research

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The short investment cycle: Our roadmap
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