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buys back more T-Bonds. More money in the economy means more spending which should put more monetary value into the markets. Investors need to then choose what sectors they want to be in. Recessions hit different sectors in different ways. Some may boom back in the expansion phase while others may stall. Knowing what the next bustling sector is from the others is what makes a great investor from an average.

Companies can benefit from knowing the peaks and bottoms of a business cycle. Knowing the bottom can help a business plan inventory levels, hire the right amount of employees and negotiate future prices on services to the business. Know the peak during the expansion phase is just as important because companies can decrease production and start planning their layoffs sooner than later to save money. Timing during the business cycle is strictly on management’s vision. It exposes a company’s management and gives investors a clue what company is well managed.

The business cycle has an adverse effect on some companies. The common notion is all companies are effect by a recession; however there are recession proof companies. Walmart is a prime example of a company that does well during a recession. The customer knows what they are getting and it’s always at a cheap price. During a recession customers are looking for the lowest prices because times are hard. Walmart is a store that attracts more business during this time because they supply goods that you need to live such as food, clothes, and miscellaneous items to survive. Companies such as Gucci and Prada and other high end retailers are surprisingly not effected as much in a recession. High end stores target the super-rich and a recession rarely impacts this class. Companies that tend to the middle class such as Coach, Jack Spade and Ford that takes a hit. It is the middle class affected the most during a recession. Companies like McDonald’s will have an increase in business during this time because it’s affordable and the middle class who could afford to eat out at nicer restaurants will now settle for less.

The business cycle is a concept that is very important for every company. It will help business forecast and plan correctly. A company needs to know where it fits in the cycle and prepare for down times. It will help with managerial decisions and can help protect profit. Staying current on economic data reports and trends will increase the likelihood of staying ahead of the game. Most importantly, knowing where your company stands in the cycle will help focus on where its weakness is as well. Once a company knows where it has a hard time in the cycle, it can make arrangements to better itself.

The business cycle is crucial for every person to understand. It can help them plan for economic hardship. They can plan out their savings accordingly and have an emergency fund ready. Understanding the cycle will build a person’s wealth not taking it away. Many investors pull their money out right before an economy peak and waits to invest during a recession. Timing may be hard to figure out but you can always gauge it. Many investors never pick the exact tops and bottom but they know never to invest when an economy is red hot – that’s how you lose wealth. “Buy the fear, sell the greed.” – Warren Buffet.

Works Cited

1. "Business Cycles." : The Concise Encyclopedia of Economics. N.p., n.d. Web. 04 Dec. 2014.

2. "The 4 Critical Stages of the Business Cycle." About.com News & Issues. N.p., n.d. Web. 08 Dec. 2015.

3. Mitchell, Wesley C. Business Cycles. N.p.: U of California, 1913. Print.

4. Hayek, Friedrich A. Von, and Hansjörg Klausinger. Business Cycles. London: Routledge, 2012. Print.

5. Tvede, Lars. Business Cycles: The Business Cycle Problem from John Law to Chaos Theory. Amsterdam, the Netherlands: Harwood Academic, 1997.