Trough refers to the phase in the economic cycle that marks the end of the contraction phase. It is the stage that occurs just before the expansion phase and is the opposite of the peak phase.
The trough is identified through high levels of unemployment and redundancies, declining business revenues, and lower credit availability, which improve as the economy moves into expansion.
It is not always clear when the trough will occur and is often only identifiable in hindsight. It is where the contraction of the economy bottoms and may last for a long or short period of time.
During the transition from trough to expansion, bonds and interest rate sensitive equities are favourable (such as banks or house-building firms). This is because demand for borrowing money increases.
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