The Economic Cycle Explained: Business, Macro, and Super Cycles - Part 2

If you have not read yesterday's blog post, please read it before continuing here.

How to Tell Where We Are in the Cycle

Rather than trying to label the cycle with precision, it is often more useful to observe signals. One place to look is policy. Are policymakers proactively stimulating growth, or reacting defensively to inflation, debt, or instability? When policy shifts from enabling growth to managing consequences, that often signals a later-stage environment. Capital flows offer another clue. Which asset classes are breaking out of long-term ranges? Which sectors are attracting sustained investment after years of neglect? Finally, constraints matter. In early cycles, demand is the driver. In later cycles, constraints take over. Energy, materials, labor, and supply chains start to matter more than abstract growth assumptions.

When constraints dominate, the market is telling you something important.

The Shift Toward Commodities: A Macro Signal

For much of the last several decades, commodities were ignored. Disinflation, globalization, and financialization reduced the importance of physical inputs. Capital flowed toward technology, services, and intangible assets. That period may be ending. Years of underinvestment in energy and materials left supply tight just as inflation returned and geopolitical fragmentation increased. Suddenly, resource security matters again. Real assets re-enter the conversation not as speculative trades, but as strategic necessities.

This shift is not unprecedented. In the 1970s, inflation, energy shocks, and geopolitical stress led to a powerful commodities cycle while equities struggled in real terms. In the early 2000s, China's industrialization drove a multi-year boom in metals and energy as global demand overwhelmed supply. Today's setup is different in detail, but similar in structure. Supply constraints, higher capital costs, and political fragmentation all point toward a regime where real assets play a larger role.

Importantly, this does not mean commodities go up in a straight line. It means they matter again in the macro framework.

What This Means for Investors

The goal of understanding cycles is not to call tops or bottoms. It is to avoid being structurally misaligned. When the dominant cycle changes, assumptions break. Correlations shift. Strategies that rely on cheap capital or stable policy may struggle. Opportunities do not disappear, but they rotate.

Investors who understand the cycle can focus less on short-term noise and more on positioning. They can ask better questions about risk, durability, and where capital is likely to flow over time. Cycles do not eliminate opportunity. They redistribute it.

Final Thoughts: Zooming Out Is the Edge

Most market mistakes come from fighting the cycle, not from being wrong about a headline. Zooming out provides perspective, patience, and risk awareness. You do not need to predict the future to navigate markets effectively. You need to understand the environment you are operating in.

The cycle always wins. The only real decision is whether you are positioned with it or against it.