What are the cyclical industries?

Something reappears in the same order in the course of time. This is the cyclical nature of things. In the stock market, the market gradually develops from a bull market to a bear market, and from a bear market to a bull market. This The repetitive process is the cyclical nature of the market.

Each industry will have its own cycle, and some are very obvious, rising and falling with the economic cycle. Such industries are called strong cyclical industries. Some industries are not or are rarely affected by market economic cycles. Such industries are called weak cyclical or non-cyclical industries.

Which industries in the market are strong cyclical industries and which are weak cyclical industries?

Strong cyclical industries can be roughly divided into three categories.

The first category is steel, chemicals, cement, electricity and other industrial industries. When the economy is booming, the country will expand investment in infrastructure, and the market demand for products in these industries will increase. Performance will maintain growth, and the same is true when the economy weakens.

The second category is non-essential consumer industries such as real estate, tourism, clothing, etc. When economic growth increases, people’s living standards improve and their purchasing power will increase, which will drive these non-essential consumer industries. growth rate. When the economic situation is not good, consumption of such products will be reduced.

The third category is banks, insurance, securities firms, etc. in the traditional financial industry.

Weak cyclical industries

Weak cyclical industries mainly refer to some necessary consumer industries, that is, no matter what the economic situation is, it will not affect the demand of these industries, such as medicine, food, etc. No matter what the economy is like, you need to take medicine when you are sick, and you need to eat when you are hungry.

Cyclic industries are closely related to the economic situation. When the economic situation is booming, the profits of companies in cyclical industries will grow faster, which will also lead to an increase in stock prices. Therefore, when the market is booming, choose strong cyclical industries. The sex industry often brings us more money.

When economic growth slows or even falls, strongly cyclical industries may enter a trough period, and their corresponding stock prices will fall, and the investment risks they face will be higher than those of weak cyclical industries.