Capital market expectations business cycles is very confusing

Trying hard to remember this, but I always mess up in the questions. Is there a logical way to remember what variable goes up and what stage in the cycle?

I’m looking for the same advice…

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Are you referring to the Exhibit 6 of Page 203 in the curriculum?

There are are 5 stages: initial recovery, early exp, late exp, slowdown and contraction.
I just memorize that initial recovery is the minimum and slowdown is the maximum/peak.
The money market rates and bondyield are pretty straightforward and align with the min and max mentioned above.

The tricky part for me was the stimulus and yield curve shape.
For stimulus, it serves as a way to help the economy so it makes sense as counter cyclical, as stimulus is the highest at initial recovery, and more restrictive at slowdown.

For the yield curve shape changes, I really don’t understand why, so likely I am not going to pretend I have an easy way to memorize it, so I pray that it won’t come up during the test :wink:

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I would suggest to focus on the ST Interest rates: if you understand the mechanics then you can derive the impact on bonds, equity, YTM curve, inflation…not easy to recall everything, you should understand the concept

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