The most important macro driver to watch is the stage of the business cycle, explains Vince Pezzullo, Portfolio Manager at Perpetual Equity Investment Company (ASX:PIC). There are two elements to the business cycle. Firstly, inventory cycle – overbuilding at the top of the cycle results in inventory having to clear. You end up with no growth and no production. Secondly, industry lifecycle – where are we in the lifecycle of returns? “Cycles can be long, but everything usually reverts back to the mean over time.” Central Banks are generally poor at timing cycles, often acting too late. Business, on the other hand, are usually early – they know when customers aren’t ordering. “That’s your best macro – when you speak to the companies and find out what’s actually going on in their business.” He expands on these points in the short video below.