Cyclical and Non-Cyclical Stocks

Non-Cyclical Stocks(Defensive): 

These kinds of stocks tend to do well in economic downturns which are never fun. However, since demand for these kinds of products and services continue on no matter how broke consumers are it helps soften the blow. For example, utilities such as electricity, gas and water are defensive stock areas. (There are also the classic examples of toothpaste, toilet paper, and cleaning materials.) When the economy is growing, these stocks tend to fall behind the group though. In economic downtimes their steady returns tend to look pretty good on your portfolio. 

Cyclical Stocks(Offensive):       

These stocks thrive when consumers and businesses have and spend money. For example, things like iPads and luxury cars are pretty awesome to have but you’re not going to purchase them with a tight budget. If there are lots of layoffs though or high interest rates people may decide on purchasing these excess items at a later date. 

When times are good money wise businesses like to try and expand as much as they are able to. Construction and equipment sales are Cyclical stocks that will thrive when the economy is boosted. When businesses are expanding that means great things for these equipment and construction companies. Cyclical stocks such as steel manufacturing and sales will suffer alongside with the economy. If consumers aren’t purchasing product then there’s no reason for a business to expand.