Lasting an average of about one year, the early phase of the business cycle has historically produced the most robust stock performance on an absolute basis (see chart, below). Stocks have typically benefited more than bonds and cash from the backdrop of low interest rates, the first signs of economic improvement, and the rebound in corporate earnings. Relative to the long-term strategic allocation, stocks have exhibited the greatest outperformance in the early cycle, while bonds and cash have experienced the deepest underperformance (see chart below). A hallmark of this phase is that hit rates against the balanced benchmark are the most definitive, which may give investors greater conviction to overweight riskier assets and underweight more defensive asset classes during the early cycle.