The Economic Cycle Explained: Business, Macro, and Super Cycles - Part 1

Markets often feel chaotic when viewed day to day. Prices move on headlines, narratives flip weekly, and every pullback or rally comes with a new explanation. But when you zoom out far enough, markets are not random at all. They move in cycles. Most investors spend their time trying to predict what happens next. Far fewer spend time asking the more important question: where are we right now?

Understanding economic cycles does not give you perfect timing. What it gives you is context. And context is often the difference between fighting the market and moving with it. This post breaks the big picture down into three layers: the business cycle, the macro investment cycle, and the super cycle, often described through the lens of the Fourth Turning. Then we'll tie it together with what many markets are signaling today: a shift toward a commodities-driven cycle.

The Business Cycle: The Economy's Short-Term Rhythm

The business cycle is the most familiar layer. It describes the natural expansion and contraction of economic activity over time, typically lasting anywhere from three to ten years. At its core, the business cycle moves through four phases: expansion, peak, contraction, and trough. These phases are driven by changes in credit availability, consumer demand, employment, and monetary policy. When credit is cheap and confidence is high, economies expand. When inflation rises, policy tightens, or leverage becomes excessive, growth slows and eventually contracts.

Key indicators often used to track the business cycle include GDP growth, inflation, employment data, central bank policy decisions, and the shape of the yield curve. For markets, the business cycle matters because different assets perform better at different stages. Early and mid-cycle environments tend to favor risk assets like equities. Late-cycle environments often see rising volatility and narrower leadership. During contractions, capital typically rotates toward defensive assets and balance-sheet strength.

But the business cycle alone does not explain why certain asset classes can outperform for decades while others stagnate. For that, you need to zoom out further.

The Macro Investment Cycle: Capital Rotation Over Decades

Macro investment cycles operate on a longer time horizon, usually spanning ten to twenty-five years. These cycles reflect where capital flows over time, not based on quarterly data, but based on regimes. A macro cycle often favors one broad category of assets over another: growth versus value, financial assets versus real assets, and leverage versus cash flow.  These cycles are shaped by interest rate regimes, debt accumulation, productivity trends, and policy responses to previous crises.

The post-2008 period is a good example. Following the Global Financial Crisis, central banks suppressed interest rates and injected liquidity into the system. That environment strongly favored long-duration financial assets, growth equities, and business models built around cheap capital and scale. By contrast, environments marked by rising rates, inflation constraints, or resource scarcity tend to reward pricing power, tangible assets, and cash-generating businesses.

Macro cycles usually end not because of a single event, but because the system reaches diminishing returns. Debt stops producing growth. Policy tools lose effectiveness. Asset prices disconnect from real-world constraints. At that point, the cycle transitions. And those transitions are often violent.

Super Cycles and the Fourth Turning: The Big Picture Shift

Super cycles operate on an even longer time scale, often lasting seventy to one hundred years. These cycles are not purely economic. They involve social, political, and institutional change.

One popular framework for understanding super cycles comes from the book The Fourth Turning, which describes long historical rhythms made up of four phases, culminating in a crisis period where existing systems are restructured. In a Fourth Turning-type environment, old institutions lose credibility, debt burdens become unsustainable, and societies are forced to make real trade-offs. These periods are typically marked by higher volatility, geopolitical tension, inflationary pressures, and a re-prioritization of resilience over efficiency.

For investors, super cycles matter because they change the rules of the game. Strategies that worked for decades can stop working entirely. Capital shifts away from financial engineering and toward durability, security, and real-world inputs.

Super cycles don't end neatly. They resolve through stress.

Come back tomorrow for Part 2 of this topic!