What are cyclic stocks?

Cyclical stocks are affected by macroeconomic changes. Their returns follow the cycles of an economy. Cyclical stocks are generally the opposite of defensive stocks. Cyclical stocks include discretionary companies, such as Starbucks or Nike. Defensive stocks are staples, such as Campbell Soup.

What is an example of a cyclical cycle?

The term cyclical describes things that aren’t behaving in a stable and regular pattern but occur in irregular intervals – a cycle is where the same events happen repeatedly in the same order. For example, seasons changing each year, or the sun orbiting the planet – both of these things can be described as cyclical.

Are cyclical and noncyclical stocks the same?

The performance of cyclical stocks tends to correlate with the economy but the same can't be said about noncyclical stocks. These stocks tend to beat the market regardless of the economic trend, even when there's a slowdown in the economy. Noncyclical stocks are also referred to as defensive stocks.