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Watch out for a short, sharp finish to the business cycle

When is the next recession going to start? It might seem like a particularly doom-laden question, particularly as the economic recovery after the financial crisis is still insipid in much of the developed world.

But knowing whether we are at the start, middle or end of a cycle is crucial for investors globally as equity and bond returns are closely linked to recessions and recoveries.

Listen to some politicians and central bankers and it can seem as if we are only at the beginning of this cycle with economies still recovering from the effects of the financial crisis. The dominant view among investors is probably that we are mid-cycle with equity markets stagnating as leading economic indicators start to peak and corporate earnings stop surprising positively as much as they did earlier in the cycle.

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