Business Cycle Analysis and Investment Implications

In the context of modern economic theory, the business cycle is characterized by fluctuations in economic activity over time, often described in four phases: expansion, peak, contraction, and trough. As a portfolio manager, understanding how these phases interact with various asset classes can inform your investment strategies.

Describe the implications of each phase of the business cycle on equity and fixed-income investments. Additionally, provide examples of specific sectors or industries that typically perform well or poorly during each phase of the cycle. Conclude by discussing how this analysis can guide asset allocation decisions within a diversified portfolio.