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What are Cyclical stocks?

A cyclical stock is an equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies that sell discretionary items consumers can afford to buy more of in a booming economy and cut back on during a recession. A Cyclical stock is a stock highly correlated to the economic activity. When the economy is in a recession the profits of a Cyclical company tend to drop and so its share price. Conversely, when the economy is in a good shape (expansion), the share price tends to goes up with the profit growth.

Submitted on 12th Feb 2018

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