Economic Expansion

An economic expansion is the phase of the business cycle in which output, employment, and incomes grow from a trough toward a peak. The National Bureau of Economic Research dates US cycles, and the longest expansion on record ran 128 months, from June 2009 until the pandemic ended it in February 2020.

Why it matters

Expansions are when most wealth is created, and their character shapes markets. Early expansion favors risk assets as credit loosens and profits recover, while late expansion often brings tight labor markets, rising inflation, and central bank tightening, the classic preconditions for the next downturn. Investors watch expansion aging through indicators like the yield curve, which has inverted before most postwar US recessions.

Expansions have also grown longer since the 1980s, which economists attribute partly to services replacing manufacturing and partly to active monetary management. The cost of that management, critics argue, is debt accumulating faster than income across each cycle.

In the gold vs bitcoin debate

Long expansions are historically hard on gold, since rising real yields and strong equities raise the cost of holding a yieldless metal, as during gold's slide through the 1990s boom. Gold shines when expansions end. Bitcoin has existed through only a handful of cycles, complicating claims about its behavior, though it has tended to thrive when money is loose. Both assets ultimately trade against confidence in the expansion itself.