Alternate name: recessionary trough
How Does a Trough in the Business Cycle Work?
A trough in the business cycle marks the low point in the economic cycle. It follows a period of decline after the economy hits peak productivity. Employment and output will fall for a time, and the government often steps in to stimulate a recovery. As the economy works through the trough, growth will resume and the cycle will begin again.
The Great Recession began its decline from a peak in December 2007. The trough was reached in June of 2009, and the next peak didn’t occur until February 2020. In other words, the recession lasted from December 2007 to June 2009, and the recovery continued from June 2009 all the way until February 2020.
What It Means for Individual Investors
During a recession, certain businesses slow down and others pick up. In general, consumers spend less money, and they shift their spending to discount brands and off-price retailers. The market experiences what is known as a sector rotation as investors sell stocks expected to do poorly and move money to those expected to do better.
