Tour de finance

There has been a lot of cycling going on during July 2015 that you might have seen… especially Chris Froome piloting his Pinarello over 3,500km through France wearing a yellow jersey…we prefer to honour the traditional origins of the yellow hue!

The economists amongst you will be aware that cycles exist in the world of finance too, viz; Kitchin Inventory, Juglar Fixed, Kuznets Infrastructural, Kondratiev Wave and the less glamorous sounding Pork Cycle. Each of the cycles is worth a Google (other internet search engines are available) but the reader could be forgiven for reaching the conclusion that economic cycles are more about what has happened rather than what will happen. This is because economics is a social science…there are no hard and fast formulae into which you can plug in the current variables to predict an outcome.

A famous analogy for the economy is the comparison to driving a car with all of the windows blacked out except the rear window. The driver then merely views what has gone before via the rear view mirror and if he wants to alter the pace of the car (economy) then the accelerator and brake pedals take five years to bring about a change…and are sometimes both applied at the same time.

So, where do those ‘in the know’ feel we are currently at in relation to the various economic cycles? Well, you’ll win no prizes for predicting an interest rate rise since rates have been bumping along the bottom for many years now. But interest rate rises are often seen in times of growth…a kind of brake to check inflation…so we might assume growth is still on the horizon for UK plc. Growth has positive connotations but may still present stakeholder and entrepreneurs with new challenges…business expansion, funding issues, skills gaps, possible overtrading. If you or your clients would welcome a free consultation on how the ‘good times’ might affect your business, then please contact us.