Explain how the stage of the business cycle shapes return expectations over short and long horizons

Cycles have phases: initial recovery, early expansion, late expansion, slowdown and contraction. Each carries typical patterns: in initial recovery short rates are low, bond yields bottoming and equities rally; in late expansion inflation and policy rates rise, bonds suffer and equities may stall; in slowdown the yield curve flattens or inverts and credit spreads widen; in contraction yields fall and cyclical equities underperform. Over short horizons the phase dominates expected returns, so tactical views follow it. Over long horizons the cycle averages out and trend growth, inflation and valuation levels dominate, though today's starting valuations still matter. The trap is projecting a phase-specific return into a strategic horizon, or misjudging the phase because cycles vary in length and amplitude.