Gross domestic product (GDP) is the total value of goods and services an economy produces. The business cycle is the recurring pattern of growth (expansion) and decline (recession) in GDP, employment and company profits.
Cyclical and defensive companies
Cyclical sectors - such as industrials, materials, consumer discretionary and energy - earn much more in good times and much less in recessions. Defensive sectors - such as consumer staples, health care and utilities - sell things people need regardless, so their profits are steadier.
Markets look ahead
Share prices often fall before a recession is officially confirmed and start to rise while the economic news is still bad, because investors price in what they expect months ahead.
This content is general information, not investment advice.