Can someone please define 'cyclical' for me? Thanks.
Cyclical stocks are ones tied to the economic condition -- such as manufacturers of big-ticket items or providers of luxury services.If the economy heads south for a while, with more people out of work and people in general being worried, then the fortunes of cyclical companies change. Consumers put off major purchases, such as homes, cars, refrigerators. They may cancel or postpone expensive vacations. This means that business won't be too brisk for automobile makers, major appliance makers, cruise lines, construction-related companies, etc.In sum, you'll see cyclical companies sporting revenues that surge and fade in relation to the economy.The opposite of cyclical companies are defensive ones, such as pharmaceutical firms, food companies, and utility companies. No matter the economic condition, people will still eat, take their pills, and turn on lights.Hope that helps!Selena
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