E.g. Investopedia: Business Cycle has a section "Stages of the Business Cycle":
All business cycles are characterized by several different stages, as seen below.
1. Expansion. This is the first stage. When expansion occurs, there is an increase in employment, incomes, production, and sales. People generally pay their debts on time. The economy has a steady flow in the money supply and investment is booming.
2. Peak. The second stage is a peak when the economy hits a snag, having reached the maximum level of growth. Prices hit their highest level, and economic indicators stop growing. Many people start to restructure as the economy's growth starts to reverse.
3. Recession: These are periods of contraction. During a recession, unemployment rises, production slows down, sales start to drop because of a decline in demand, and incomes become stagnant or decline.
4. Depression: Economic growth continues to drop while unemployment rises and production plummets. Consumers and businesses find it hard to secure credit, trade is reduced, and bankruptcies start to increase. Consumer confidence and investment levels also drop.
5. Trough: This period marks the end of the depression, leading an economy into the next step: recovery.
6. Recovery: In this stage, the economy starts to turn around. Low prices spur an increase in demand, employment and production start to rise, and lenders start to open up their credit coffers. This stage marks the end of one business cycle.
If all you know is that markets are anti-inductive, and therefore anticipate a random walk with an average of 10%/year growth, don't you automatically expect the stock market fluctuations to sometimes look like bull markets and recessions?
So does the "business cycle" add any explanatory power, or is it merely the type of retroactive non-explanation that you get when you read a news article about the 1-day movement of the stock market?
Maybe you can argue that the business cycle is self-reinforcing due to psychological reactions.
But to the degree that the business cycle is a separate understandable phenomenon, can't investors use that understanding to place bets which make them money while dampening the effect?
I think Liron only meant the times of growth with those 10%. Looking at the recent stock market you will clearly find growth that is much higher than the long term rate and higher than economy + inflation + "risk free return". In the last 10 years the annual rate was indeed 10.5% pa