{"id":3705,"date":"2024-06-03T10:22:49","date_gmt":"2024-06-03T10:22:49","guid":{"rendered":"https:\/\/lemonn.co.in\/blog\/?post_type=glossary&p=3705"},"modified":"2024-06-03T10:22:50","modified_gmt":"2024-06-03T10:22:50","slug":"cyclical-stocks","status":"publish","type":"glossary","link":"https:\/\/lemonn.co.in\/blog\/glossary\/cyclical-stocks\/","title":{"rendered":"Cyclical Stocks"},"content":{"rendered":"

Cyclical equities are shares<\/a> of firms whose business success and stock values are strongly linked to the economic cycle. These stocks<\/a> typically rise during economic booms and plummet during recessions, making them vulnerable to changes in the wider economy.<\/p>\n\n\n\n

Features of Cyclical Stocks<\/a><\/h3>\n\n\n\n
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  1. Economic Sensitivity<\/strong>: The performance of cyclical stocks is highly dependent on economic conditions. When the economy grows, consumer spending rises, increasing the revenue<\/a>s and profits of these businesses.<\/li>\n\n\n\n
  2. Volatility<\/a><\/strong>: Cyclical stocks have higher volatility than non-cyclical stocks (defensive stocks<\/a>). Their pricing can vary dramatically depending on economic projections and indications.<\/li>\n\n\n\n
  3. High Beta<\/a><\/strong>: These stocks typically have a higher beta, indicating that they are more sensitive to market fluctuations. A high beta suggests that the stock will move more than the market average.<\/li>\n<\/ol>\n\n\n\n

    Examples of cyclical sector<\/a>s<\/h3>\n\n\n\n
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    1. Consumer discretionary<\/strong>: This category includes companies that sell non-essential products and services such as automobiles, travel, and luxury items. They perform better during economic booms, when consumers have more disposable income.<\/li>\n\n\n\n
    2. Technology<\/strong>: During economic booms, businesses and consumers are more ready to invest in new technologies, resulting in higher demand for tech companies’ products and services.<\/li>\n\n\n\n
    3. Industrial<\/strong>: Manufacturing and heavy industry firms often perform well in an expanding economy with strong infrastructure and capital spending.<\/li>\n\n\n\n
    4. Finance<\/strong>: During economic upturns, banks and other financial institutions gain from increased loan demand and higher credit quality.<\/li>\n<\/ol>\n\n\n\n

      Investing in cyclical stocks<\/h2>\n\n\n\n