Our Insights

June 2021 – 3 in 3

This month, Jason Weaver discusses the business cycle, factor investing and P/E ratios.



Business Cycle

There are four phases to the business cycle.

Early (Recovery)

Activity Rebounds (GDP, Employment, Income)
Credit begins to grow
Profits grow rapidly
Stimulative policy
Improving sales & low inventory

Mid (Expansion)

Growth peaking
Credit growth strong
Profit growth peaks
Neutral policy
Inventories & sales grow

Late (Slow Down)

Growth moderating
Credit tightens
Earnings under pressure
Contractionary policy
Inventories grow and sales growth falls

Recession (Contraction)

Falling activity
Credit dries up
Profits decline
Policy eases
Inventories & sales fall

Factor Investing


Stocks discounted relative to their fundamentals
Early Cycle


Stocks with upward price trends
Mid Cycle

Minimum Volatility

Stable, lower risk stocks
Late Cycle


Financially healthy companies
Late Cycle


Smaller, high-growth companies
Early Cycle

P/E Ratios

Widely used ratio for valuing companies by comparing share price to earnings

Higher P/E ratio shows investors are willing to pay more today because of growth expectations

Low P/E ratio might indicate that stock price is low relative to earnings

P/E ratios vary by factor and sectors

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June 2021 – 3 in 3 Weaver Consulting Group is a local, family owned, Registered Investment Advisory practice in Huntington Beach, California. We have been providing our expertise and sharing our experiences for the last 22 years. It is our priority to act in the best interest of each person that we work with. Therefore, the experience you have with our firm is individually tailored. We strive to include all aspects of your personal and financial goals when consulting.