Cyclic VS Non-Cyclical sectors
Cyclical and Non-cyclical refers to how closely the sectors are correlated to the economy.
Cyclical are those which have a direct relationship to the economy. When the economy grows the price of cyclical stocks goes up. When the economy slows down, the prices are likely to drop. Cyclical companies follow the trends in the overall economy, which makes their stock prices very volatile.
Cyclical companies offer non-essential products/services so customers may postpone spending in case of an economic slowdown.
Some Cyclical sectors include Luxury goods, Restaurants, Infrastructure, Airlines, Hotels etc.
Non-cyclical are those which do not have a direct relationship with the economy. Companies from these sectors usually outperform the market during an economic slowdown.
Non-cyclical companies offer essential products/services and customers have to spend on them irrespective of the economic cycle. As these company stocks are not very much affected by economic shifts these are also called Defensive stocks.
Some non-cyclical sectors include FMCG, Healthcare, BFSC, Utilities etc.
Which sector stocks are you invested in?
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