Equities
Cyclical Stocks
Cyclical stocks come from industries tied closely to consumer and business spending, such as automakers, airlines, homebuilders, and luxury retailers. When incomes are rising and confidence is high, these companies flourish.
The flip side is vulnerability. In a recession, discretionary purchases are the first to be cut, so cyclical earnings can fall sharply and their share prices with them.
Because they amplify the economic cycle, cyclicals are favored early in a recovery when growth is accelerating. Timing exposure to them is a central part of sector rotation.
Example
An automaker whose sales surge in a boom and slump in a recession is a textbook cyclical stock.
Cyclical Stocks — FAQ
What is Cyclical Stocks?
Cyclical stocks are shares of companies whose fortunes rise and fall with the broader economy, booming in expansions and struggling in downturns.
Can you give an example of Cyclical Stocks?
An automaker whose sales surge in a boom and slump in a recession is a textbook cyclical stock.
Understanding creates conviction.
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