Identifying the Peak Phase of the Business Cycle

James is a junior analyst at a financial advisory firm. He is tasked with evaluating the current economic environment to advise on investment strategies. He notes that the economy appears to be transitioning from a period of expansion to a possible contraction.

He recalls the four phases of the business cycle: expansion, peak, contraction, and trough. Knowing that each phase has distinct characteristics, he prepares a report that outlines the potential impacts of these changes on asset classes.

What phase of the business cycle is characterized by high consumer confidence and output nearing capacity, which James must now determine whether the economy is transitioning from?