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

Data Collection Notice

We maintain a record of your data to run this website. By clicking the button, you agree to our Privacy Policy.

facebook logo with graphic

Join Us on Facebook

Stay on top of company updates, trading news, and so much more!

Thanks, I already follow your page!
forex book graphic

Beginner Forex Book

Your ultimate guide through the world of trading.

Get Forex Book

Check Your Inbox!

In our email, you will find the Forex 101 book. Just tap the button to get it!

FBS Mobile Personal Area

market's logo FREE - On the App Store

Get

Risk warning: ᏟᖴᎠs are complex instruments and come with a high risk of losing money rapidly due to leverage.

72.12% of retail investor accounts lose money when trading ᏟᖴᎠs with this provider.

You should consider whether you understand how ᏟᖴᎠs work and whether you can afford to take the high risk of losing your money.

Cyclical stocks

Cyclical stocks

2022-08-26 • Updated

Information is not investment advice

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!

LOG IN

Similar

Williams’ Strategy

Bill Williams is the creator of some of the most popular market indicators: Awesome Oscillator, Fractals, Alligator, and Gator.

ADX Trend-Based Strategy

Trend strategies are good - they may give significantly good results in any time frame and with any assets. The main idea of the ADX Trend-Based strategy is to try to catch the beginning of the trend.

Counter-Trend Impulse Strategy

Counter-trend strategies are always the most dangerous but also the most profitable. We are pleased to present an excellent counter-trend strategy for working in any market and with any assets.

Choose your payment system

Feel the Team Spirit

Callback

Please fill in the form below so we can contact you

Select the best time for us to call you. We give calls from Monday to Friday in suggested intervals. In case we couldn't get through, we will try again at the same time the next day. For getting real-time assistance, use FBS chat.

We provide only English-speaking callbacks. If you prefer any other languages, contact the support team.

We will call you at the time interval that you chose

Change number

Your request is accepted.

We will call you at the time interval that you chose

Next callback request for this phone number will be available in 00:30:00

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

Internal error. Please try again later