What typically happens to stock values during the recovery phase?

During the recovery phase of an economic cycle, stock values typically rise as investor confidence returns and economic activity begins to pick up. This phase is characterized by increasing consumer spending, business investments, and improving corporate earnings, all of which contribute to a bullish sentiment in the market. As companies begin to perform better and expand, their stock prices reflect this positive outlook, leading to an upward trend in stock values. Investors who may have previously been cautious during the recession phase start to re-enter the market, further driving up stock prices.

In summary, the recovery phase is marked by a general optimism about future economic conditions, which causes stock values to rise as investment opportunities become more attractive.