Breaking Down The Current Business Cycle | Eric Basmajian

What's up, everybody? Before we get started on the show, I just wanna give a quick shout out to our new forward guidance newsletter. It runs 5 days a week and talks about all things macro, digital assets, and how the two worlds are starting to collide together. I'm a writer for it at least once a week, as well as a very talented editorial team. And so check the link in our description to go sign up today. It's free, and you won't regret it. Alright. Back to the show. Alright. Welcome back to another episode of Ford Guidance. And joining me today is Eric Bazmajan of EPB Research. Eric, it's gre

It's great to be here. Thanks for the invite, Felix. And I was saying in the pre show that we gotta get you on the other side of the camera because you've been posting a lot of great stuff as well. Thanks,

man. That that means a lot coming from you. Look. I wanna get right into things. I wanna I wanna talk to you about business cycles, about where we are in the business cycle, you know, how we just define different perspectives on the economy. So I just wanna start from the top level here, and I know you prepared a few slides here to walk us through as we look through the process of actually defining a business cycle. But what is a business cycle? Why do we track them? And what's your definition of it? And what's your process for tracking it? So,

I brought a few slides to help me, you know, walk through the the way that I explain the business cycle and the process that that we use. So, at EPB Research, we focus on, business cycles and primarily the US business cycle. And most people are familiar with this sort of sine wave representation of the business cycle where we go through periods of expansion and periods of recession. And what this sine wave represents is aggregate economic activity, or you could think of it as the average person or the average business or just sort of a overall blend of all the economic activity that's happenin

Eric. So I have a few gut ideas that I wanna throw at you and see if we can prove out right or wrong the validity of them, and whether we can just point some data towards it. So my first question is something that a lot of people I feel like have been wondering is, is this business cycle different than normal? Has it been a weird business cycle? Because I think back to, you know, say, 2022, we saw, you know, we had a we had a negative GDP print. We had we initially had a a second negative one, but it got revised higher, previously. So that kinda came out, but it felt like people were looking a

So I think that there's a lot a lot of validity to that statement, and I'll unpack it there because I think the answer is both yes and no. So the answer is yes, that this is still a very normal business cycle as it pertains to the sequence of the way that the data spreads from the leading sectors to the cyclical sectors to the aggregate. And we can see that in this charts that I presented that the the the cyclical sectors of construction and manufacturing are sequentially decelerating, and they have now moved into contraction. However, what is different about this cycle and what's made it very

wanna double click on that idea because I think it's a really important one, and it and it squares a few things that you're talking about here. So what you're saying is that, yeah, we've been looking at the manufacturing sector of GDP, which is, you know, I I correct me if I'm wrong, but, like, service base is, like, I don't know, 2 thirds of GDP, and manufacturing is, like, 1 third. So we're talking about the 1 third, and then of that 1 thi