The attached note takes a look at investment cycles - what drives them and why investors need to allow for them. The key points are as follows:
Cyclical fluctuations are a key aspect of investment markets. Most are driven by economic developments but are magnified by swings in investor sentiment.
Of particular importance are the long-term cycles which are often driven by waves of innovation and the 3-5 year business cycle. Right now, we are still in the downswing phase of the business cycle and may have entered a weaker and constrained phase of the long-term cycle.
Periods of poor returns invariably give way to periods of great returns and vice versa. The key for investors is to not get thrown off by cyclical fluctuations.
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