Part 2/6:
Peak: The economy reaches its highest growth point. Markets might experience tight labor conditions, inflation spikes, and rising interest rates as the Federal Reserve responds.
Contraction: Economic activity slows significantly. Companies cut back on hiring and spending, leading to falling consumer confidence and rising unemployment. This was evident during the downturns seen in recent history, where major companies undertook significant layoffs amid economic uncertainty.
Trough: The economy hits its lowest point, with either very low inflation or deflation. A reactive government often steps in with measures like decreasing interest rates and quantitative easing to reignite growth.