Cyclical stocks

Cyclical stocks

2021-09-16 • Updated

While growth stocks were trending up during the last year, now the time has come for cyclical stocks to take the lead! After reading this article, you’ll …

  • know what cyclical stocks are,
  • learn how and when to trade them,
  • and maybe find your favorite ones!

What are cyclical stocks?

Perhaps, some of you have already guessed from the name “cyclical”, that it’s something about cycles. Yes, you’re definitely right! The term ‘cyclical’ refers to a stock of a company, which performance generally follows the economic cycle of expansion, peak, recession, and recovery. Imagine a roller coaster: cyclical stocks rally up in times of economic expansion, hit record highs when the economy is at its peak, fall during recessions and market instability, and finally reverse up and start climbing again amid recovery. Well, the idea is clear: stocks mimic economic cycles. But can you name the real examples or some segments? What do consumers tend to buy more during prosperity but spend less on during a recession? Think a few seconds and then compare with the examples below!

Well, cyclical stocks are usually the companies that offer non-essential goods or services, such as appliances, cars, and entertainment. Besides, cyclical stocks tend to be volatile and produce higher returns during periods of economic strength.

Examples of cyclical stocks

The travel, hospitality, and entertainment industries have been hit hard by social distancing restrictions amid the pandemic. Since the constraints are easing, people are more willing and able to spend money on traveling. Thus, such stocks as Booking, TripAdvisor, Royal Caribbean, Walt Disney, and Carnival are edging higher.

Automakers tend to fall during recessions as consumers save money and keep their old vehicles instead of buying new ones. In opposite, people are more motivated to buy new cars during expansion. Therefore, such stocks as Ford, General Motors, and Ferrari are likely to jump in 2021.  

Banks are usually losing their profits during recessions. Most people stop taking mortgages, and loans or even struggle to pay their debts. Besides, interest rates tend to fall before and during recessions, as a result, banks’ profit margins decline. JPMorgan, Goldman Sachs, and Bank of America should rise in 2021 amid the global economic recovery.

It’s significant to pay attention to market trends as sometimes a recession could push up typically cyclical industries. For instance, tech stocks were viewed as cyclical stocks, but the stay-at-home regime and remote work amid the pandemic boosted the demand for cloud services and streaming platforms. Therefore, big tech stocks gained a lot and outrun pre-pandemic levels.

Why are cyclicals good for trading?

Cyclical stocks are worth trading for several reasons.

Volatility

Cyclical stocks tend to be volatile. Thus, it offers a wide range of opportunities for traders to go both long and short. When the economy is growing, cyclical stocks rally up and usually perform way better than non-cyclical ones. Besides, in times of recession, cyclical stocks tend to go down. Therefore, investors who know that from the beginning can open sell orders.

Hidden treasures

It’s a good idea to try finding undervalued cyclical stocks by the end of the recession as when economic recovery comes, the stocks with higher growth potential are likely to rocket! So, it’s better to define them as soon as possible.

Diversification

It’s common knowledge that portfolio diversification is a perfect way to minimize possible risks. Thus, most experienced traders prefer holding both cyclical and non-cyclical stocks as sometimes it’s hard to predict the time of the future recession or expansion.

How to trade cyclical stocks?

    1. Download the FBS Trader app on your mobile phone to be always able to check the charts and MetaTrader 5 on your personal computer for more complicated tech analysis.
    2. Make technical and fundamental analyses with the help of our articles and videos.
    3. Open a position and monitor it!

TRADE NOW

Similar

Best stocks to trade in September 2021
Best stocks to trade in September 2021

Based on the current economic changes, our long-term vision, and stocks’ performances, we have created for you a list of top stocks to trade in September 2021.

Frequently asked questions

  • How to open an FBS account?

    Click the ‘Open account’ button on our website and proceed to the Personal Area. Before you can start trading, pass a profile verification. Confirm your email and phone number, get your ID verified. This procedure guarantees the safety of your funds and identity. Once you are done with all the checks, go to the preferred trading platform, and start trading. 

  • How to withdraw the money you earned with FBS?

    The procedure is very straightforward.  Go to the Withdrawal page on the website or the Finances section of the FBS Personal Area and access Withdrawal. You can get the earned money via the same payment system that you used for depositing. In case you funded the account via various methods, withdraw your profit via the same methods in the ratio according to the deposited sums.

  • How to start trading?

    If you are 18+ years old, you can join FBS and begin your FX journey. To trade, you need a brokerage account and sufficient knowledge on how assets behave in the financial markets. Start with studying the basics with our free educational materials and creating an FBS account. You may want to test the environment with virtual money with a Demo account. Once you are ready, enter the real market and trade to succeed.

  • How to activate Level Up Bonus?

    Open Level Up Bonus account in web or mobile version of FBS Personal Area and get up to $140 free to your account.

Deposit with your local payment systems

Be on top of your game

Data collection notice

FBS maintains a record of your data to run this website. By pressing the “Accept” button, you agree to our Privacy policy.

Callback

A manager will call you shortly.

Change number

Your request is accepted.

A manager will call you shortly.

Next callback request for this phone number
will be available in

If you have an urgent issue please contact us via
Live chat

Internal error. Please try again later

Don’t waste your time – keep track of how NFP affects the US dollar and profit!

Beginner Forex book

Beginner Forex book will guide you through the world of trading.

Beginner Forex book

The most important things to start trading
Enter your e-mail, and we will send you a free Beginner Forex book

Thank you!

We've emailed a special link to your e-mail.
Click the link to confirm your address and get Beginner Forex book for free.

You are using an older version of your browser.

Update it to the latest version or try another one for a safer, more comfortable and productive trading experience.

Safari Chrome Firefox Opera