Cyclical stocks are stocks of companies which are sensitive to business cycles, that move up or down due to some extraneous factor outside the industry. Stocks in sectors such as airlines and automobiles are cyclical, as they tend to move in conjunction with the economy.
When the economy improves, disposable income rises which fuels demand for a cyclical industry’s products. Investing in cyclicals can be profitable if the factors affecting the stock are carefully identified.
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