Cyclical stocks are those that are expected to fluctuate in response to prevailing economic conditions. That is, cyclical stock prices are more likely to rise in the presence of a healthy economy and fall in the absence of one. In other words, cyclical stocks can be dependent on consumer income to service their 'wants' rather than their needs.

Cyclical stocks are shares of companies whose performance is closely tied to the fluctuations of the broader economy. These companies typically operate in sectors that experience significant ups and downs in tandem with economic cycles. Industries such as automotive, construction, travel and leisure, and consumer discretionary goods are examples of sectors with cyclical stocks.

During periods of economic expansion, cyclical stocks tend to perform well as consumer spending increases, leading to higher demand for their products and services. Conversely, during economic downturns, these stocks often struggle as consumer spending contracts, leading to decreased demand.

Investing in cyclical stocks requires a deep understanding of economic trends and cycles. While they can offer substantial returns during periods of growth, they also carry higher levels of risk during economic downturns. Successful investors often incorporate cyclical stocks into their portfolios as part of a diversified strategy, balancing their potential for growth with the inherent volatility of the market cycle.