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Stock Market Store
I Trade, Therefore I Am
Understand cycles in the market and make better wealth building decisions. Understand trend, and now you know everything.
Read about Stock Market- Price Cycles Some things benefit from high interest rates, be prepared.
Below the diagram are definitions of the cycles.
Stock Market Cycles are the patterns of expansion and contraction in the economy represented by the flow from recession to recovery and back. Cycles, as the word implies, are constant repetitive motion, conditions that repeat themselves and go on and on, round and round.
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Utilities and consumer staples, are defensive sectors, while the rest tend to be more cyclical in nature. The other nine sectors are: transportation, technology, financial, energy, consumer cyclical, basic materials, and capital goods, health care and communications services.
Cyclical Stocks - Stocks can be classified according to how they react to business cycles. Cyclical stocks are stocks of companies whose profits move up and down according to the business cycle. Cyclical companies tend to make products or provide services that are in lower demand during downturns in the economy and higher demand during upswings. The automobile, steel, and housing industries are all examples of cyclical businesses.
The stock prices of cyclical and non-cyclical stocks relate to how the business cycle changes. Cyclical stocks move more dramatically, both up and down, with the cycle, while non-cyclical stocks show little movement relative to the cycle, for example, utilities. The idea behind cyclical and non-cyclical stocks is simple. When money is tight, what can you do without or put off, and what do you really need?
Defensive Stocks - Defensive stocks are the opposite of cyclical stocks: they tend to do well during poor economic conditions. They are issued by companies whose products and services enjoy a steady demand. Food and utilities stocks are defensive stocks since people typically do not cut back on their food or electricity consumption during a downturn in the economy. But although defensive stocks tend to hold up well during economic downturns, their performance during upswings in the economy tends to be lackluster compared to that of cyclical stocks.
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