Is this a record economic expansion?

Investors have been asking how long the current economic global recovery cycle can last. The fact is, business cycles do not just die off from natural causes, events need to end them.

By InvestSMART · 22 Sep 2014

By InvestSMART ·
22 Sep 2014

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Investors have been asking how long the current economic global recovery cycle can last. The fact is, business cycles do not just die off from natural causes, events need to end them. The present modest global recovery, occurring at different rates in different parts of the world, combined with continuing accommodative monetary policy and low inflation, makes it harder to build the excesses which normally end a cycle and this could mean that the current economic cycle is the longest on record.

Indeed, this current global recovery cycle shows no sign of dying out anytime soon. The present scenario should be beneficial for global equities, particularly in higher-growth economies such as the US and UK. If US earnings grow slightly above the nominal US economy, the level of the S&P500 in 2020 could be upwards of 40% above its 2014 peak. That said, while the investment case for the US under the present circumstances is well established, Europe and Asia seem clouded in risk and uncertainty.

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Frequently Asked Questions about this Article…

How long can the current global economic recovery cycle last?

The current global economic recovery cycle could potentially be the longest on record. Business cycles don't end naturally; they require specific events to conclude. With ongoing accommodative monetary policy and low inflation, the cycle shows no signs of ending soon.

What factors are contributing to the longevity of the current economic cycle?

The longevity of the current economic cycle is supported by modest global recovery rates, accommodative monetary policies, and low inflation. These factors make it difficult to build the excesses that typically end economic cycles.

Is the current economic scenario beneficial for global equities?

Yes, the current economic scenario is beneficial for global equities, especially in higher-growth economies like the US and UK. The ongoing recovery and supportive monetary policies create a favorable environment for equities.

What is the outlook for the S&P500 by 2020?

If US earnings grow slightly above the nominal US economy, the S&P500 could be upwards of 40% above its 2014 peak by 2020, reflecting a positive outlook under the current economic conditions.

Are there any risks associated with investing in Europe and Asia?

Yes, while the investment case for the US is strong, Europe and Asia are clouded with risk and uncertainty, making them potentially less stable investment options compared to the US.

Why don't business cycles end naturally?

Business cycles don't end naturally because they require specific events to trigger their conclusion. Without such events, cycles can continue for extended periods, as seen in the current global recovery.

What role does inflation play in the current economic cycle?

Low inflation is a key factor in the current economic cycle's longevity. It helps prevent the buildup of excesses that typically lead to the end of a cycle, allowing the recovery to continue.

How does the economic recovery differ across regions?

The economic recovery is occurring at different rates across the world. While the US and UK are experiencing higher growth, Europe and Asia face more uncertainty and risk, affecting their recovery pace.