The economy doesn’t stay the same all the time. It goes through cycles—booms and busts, good times and slowdowns. Some companies do really well when the economy is strong, while others hold steady no matter what’s going on. That’s where the terms cyclical and non-cyclical stocks come in.
Cyclical stocks are tied closely to the ups and downs of the economy. These are companies that sell things people spend more on when they feel confident about money—like cars, travel, luxury goods, or new homes. When the economy is booming, these companies make more sales and their stock prices often go up. But during a recession, people cut back on these things, and cyclical companies can struggle.
Non-cyclical stocks, also called defensive stocks, are from companies that sell things people need no matter what—like food, utilities, and healthcare. Even when times are tough, people still buy groceries, pay for electricity, and go to the doctor. That means these companies tend to stay steady during economic slowdowns, which makes their stocks less risky.
Understanding the difference between cyclical and non-cyclical stocks can help you prepare for changes in the market. By having a mix of both, you can benefit
